7 unchanged sentences
Changes in Internal Control over Financial Reporting
−Removed: There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than completion of our evaluation and integration of the policies, processes, systems and operations of zColo that was acquired by DataBank in December 2020.
+Added: There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
15 unchanged sentences
(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022 , based on the COSO criteria.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15, and our report dated February 28, 2022 expressed an unqualified opinion thereon.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of DigitalBridge Group, Inc.
+Added: as of December 31, 2022 and 2021 , the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2022 , and the related notes and financial statement schedule listed in the Index at Item 15, and our report dated February 27, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
18 unchanged sentences
Other Information.
−Removed: Material U.S.
−Removed: Federal Income Tax Considerations
−Removed: The following is a discussion of certain material U.S.
−Removed: federal income tax considerations relating to our qualification and taxation as a real estate investment trust, which we refer to as a REIT, and the acquisition, holding, and disposition of our class A common stock, preferred stock, and depositary shares (for purposes of this section only, collectively referred to as “stock”).
−Removed: As used in this section, references to the terms “Company,” “we,” “our,” and “us” mean only DigitalBridge Group, Inc.
−Removed: and not its subsidiaries or other lower-tier entities, except as otherwise indicated.
−Removed: This summary is based upon the Internal Revenue Code of 1986, as amended, which we refer to as the Code, the regulations promulgated by the U.S.
−Removed: Treasury Department, which we refer to as the Treasury Regulations, rulings and other administrative interpretations and practices of the Internal Revenue Service, which we refer to as the IRS (including administrative interpretations and practices expressed in private letter rulings which are binding on the IRS only with respect to the particular taxpayers who requested and received those rulings), and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect.
−Removed: No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.
−Removed: We have not sought and will not seek an advance ruling from the IRS regarding any matter discussed in this section.
−Removed: The summary is also based upon the assumption that we have operated and will operate the Company and its subsidiaries and affiliated entities in accordance with their applicable organizational documents.
−Removed: This summary is for general information only, and does not purport to discuss all aspects of U.S.
−Removed: federal income taxation that may be important to a particular investor in light of its investment or tax circumstances, or to investors subject to special tax rules, including:
−Removed: • insurance companies;
−Removed: • tax-exempt organizations (except to the extent discussed in “—Taxation of Tax—Exempt Stockholders” below);
−Removed: • financial institutions or broker-dealers;
−Removed: individuals and foreign corporations (except to the extent discussed in “—Taxation of Non-U.S.
−Removed: Stockholders” below);
−Removed: • persons who mark-to-market our stock;
−Removed: • subchapter S corporations;
−Removed: stockholders, as defined below, whose functional currency is not the U.S.
−Removed: • regulated investment companies;
−Removed: • trusts and estates;
−Removed: • holders who receive our stock through the exercise of employee stock options or otherwise as compensation;
−Removed: • persons holding our stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment;
−Removed: • persons subject to the alternative minimum tax provisions of the Code;
−Removed: • persons holding our stock through a partnership or similar pass-through entity;
−Removed: • persons holding a 10% or more (by vote or value) beneficial interest in our stock.
−Removed: This summary assumes that stockholders hold shares of our stock as capital assets for U.S.
−Removed: federal income tax purposes, which generally means property held for investment.
−Removed: The statements in this section are based on the current U.S.
−Removed: federal income tax laws, are for general information purposes only and are not tax advice.
−Removed: We cannot assure you that new laws, interpretations of law or court decisions, any of which may take effect retroactively, will not cause any statement in this section to be inaccurate.
−Removed: FEDERAL INCOME TAX TREATMENT OF US AS A REIT AND OF YOU AS A HOLDER OF OUR STOCK DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF U.S.
−Removed: FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE.
−Removed: IN ADDITION, THE TAX CONSEQUENCES TO ANY PARTICULAR HOLDER OF OUR STOCK WILL DEPEND ON SUCH HOLDER’S PARTICULAR TAX CIRCUMSTANCES.
−Removed: YOU SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE OWNERSHIP AND SALE OF OUR STOCK AND OF ITS INTENDED ELECTION TO BE TAXED AS A REIT.
−Removed: SPECIFICALLY, YOU SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH OWNERSHIP, SALE AND ELECTION, AND REGARDING POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
−Removed: Taxation of DigitalBridge
−Removed: We elected to be taxed as a REIT under the U.S.
−Removed: federal income tax laws commencing with our taxable year ended December 31, 2017.
−Removed: We believe that we are organized and have operated, and we intend to continue to operate, in a manner so as to qualify for taxation as a REIT under the Code;
−Removed: provided that the Company will continue to evaluate whether it will maintain REIT status for 2022 or for future years.
−Removed: This section discusses the laws governing the U.S.
−Removed: federal income tax treatment of a REIT and its stockholders.
−Removed: These laws are highly technical and complex.
−Removed: Qualification and taxation as a REIT depends on our ability to meet on a continuing basis, through actual operating results, distribution levels, and diversity of ownership by holders of our securities and asset ownership, and various other qualification requirements imposed upon REITs by the Code.
−Removed: In addition, our ability to qualify as a REIT may depend in part upon the operating results, organizational structure and entity classification for U.S.
−Removed: federal income tax purposes of certain entities in which we invest.
−Removed: Our ability to qualify as a REIT also requires that we satisfy certain asset tests, some of which depend upon the fair market values of assets that we own directly or indirectly.
−Removed: Such values may not be susceptible to a precise determination, whether for past, current, or future periods, and based upon the types of assets that we own and intend to own, such values can vary rapidly, significantly and unpredictably.
−Removed: Accordingly, no assurance can be given that the actual results of our operations for any taxable year will satisfy such requirements for qualification and taxation as a REIT.
−Removed: Similarly, the income we earn from our assets may not be earned when or in the proportions anticipated.
−Removed: For example, we may encounter situations in which a relatively small investment generates a higher than expected return in a particular year (or vice versa).
−Removed: A discussion of the tax consequences of the failure to qualify as a REIT and certain alternatives is included below in the section entitled “—Failure to Qualify.”
−Removed: As indicated above, our qualification and taxation as a REIT depends upon our ability to meet, on a continuing basis, various qualification requirements imposed upon REITs by the Code.
−Removed: The material qualification requirements are summarized below under “—Requirements for Qualification.” While we intend to operate so that we qualify as a REIT, no assurance can be given that the IRS will not challenge our qualification, or that we have been or will be able to operate in accordance with the REIT requirements in the future.
−Removed: See “—Requirements for Qualification—Failure to Qualify.”
−Removed: The CARES Act
−Removed: The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") (P.L.
−Removed: 116-136) that was signed into law on March 27, 2020 includes several significant tax provisions.
−Removed: These changes include:
−Removed: • the elimination of the taxable income limit for net operating losses ("NOLs") for all taxable years beginning after December 31, 2017 and before January 1, 2021, thereby permitting corporate taxpayers to use NOLs to fully offset taxable income (although as a REIT, we will continue to only be able to use NOLs against taxable income remaining after taking into account any dividends-paid deduction);
−Removed: • allowing our TRSs to carry back NOLs arising in 2018, 2019, and 2020 to the five taxable years preceding the taxable year of the loss;
−Removed: • an increase to the business interest limitation under Section 163(j) of the Code, from 30 percent to 50 percent for taxable years 2019 and 2020 and the addition of an election by taxpayers to use their 2019 adjusted taxable income as their adjusted taxable income in 2020 for purposes of applying the limitation;
−Removed: • a "technical correction" amending Section 168(e)(3)(E) of the Code to add "qualified improvement property" to "15-year property" and assigning a class life of 20 years under Section 168(g)(3)(B) of the Code to qualified improvement property under Section 168(e)(3)(E)(vii) of the Code.
−Removed: Taxation of REITs in General
−Removed: Provided that we qualify as a REIT, we will be entitled at the REIT level to a deduction from our taxable income for dividends that we pay and, therefore, will not be subject to U.S.
−Removed: federal corporate income tax at the REIT level on our taxable income that is currently distributed to holders of our securities.
−Removed: This treatment substantially eliminates the “double taxation” at the corporate and stockholder levels that generally results from an investment in a non-REIT C corporation.
−Removed: A non-REIT C corporation is a corporation that generally is required to pay tax at the corporate level.
−Removed: Double taxation means taxation once at the corporate level when income is earned and once again at the stockholder level when the income is distributed.
−Removed: In general, the income that we generate is taxed only at the stockholder level upon a distribution of dividends to our stockholders.
−Removed: stockholders generally will be subject to taxation on dividends distributed by us (other than designated capital gain dividends and “qualified dividend income”) at rates applicable to ordinary income, instead of at lower capital gain rates.
−Removed: For taxable years beginning after December 31, 2017, and before January 1, 2026, generally, U.S.
−Removed: stockholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us,
−Removed: subject to certain limitations.
−Removed: Capital gain dividends and qualified dividend income will continue to be subject to a maximum 20% rate.
−Removed: See “—Taxation of Taxable U.S.
−Removed: Stockholders of DigitalBridge—Taxation of U.S.
−Removed: Stockholders on Distributions of Our Stock.”
−Removed: Any net operating losses, foreign tax credits and other tax attributes of a REIT generally do not pass through to holders of our securities, subject to special rules for certain items such as the capital gains that we recognize.
−Removed: See “—Taxation of Taxable U.S.
−Removed: Stockholders of DigitalBridge.”
−Removed: Even if the Company qualifies for taxation as a REIT, the Company will be subject to U.S.
−Removed: federal tax in the following circumstances:
−Removed: • the Company will pay U.S.
−Removed: federal income tax on any taxable income, including net capital gain, that it does not distribute to stockholders during, or within a specified time period after, the calendar year in which the income is earned.
−Removed: • for our taxable year ended December 31, 2017, the Company may be subject to the “alternative minimum tax” on any items of tax preference that it does not distribute or allocate to stockholders.
−Removed: • the Company will pay income tax at the highest corporate rate on:
−Removed: ◦ net income from the sale or other disposition of property acquired through foreclosure, or foreclosure property, that it holds primarily for sale to customers in the ordinary course of business;
−Removed: ◦ other non-qualifying income from foreclosure property.
−Removed: • the Company will pay a 100% tax on net income earned from sales or other dispositions of property, other than foreclosure property, by an entity other than a taxable REIT subsidiary, which we refer to as a TRS, if such property is held primarily for sale to customers in the ordinary course of business.
−Removed: • if the Company fails to satisfy one or both of the 75% gross income test or the 95% gross income test, as described below in the section entitled “—Requirements for Qualification—Gross Income Tests,” and nonetheless continues to qualify as a REIT because it meets other requirements, it will pay a 100% tax on:
−Removed: the greater of the amount by which it fails the 75% gross income test or the 95% gross income test, multiplied, in either case, by a fraction intended to reflect its profitability.
−Removed: • if the Company fails any of the asset tests (other than a de minimis failure of the 5% asset test or the 10% vote or value test, as described below in the section entitled “—Requirements for Qualification—Asset Tests”), as long as the failure was due to reasonable cause and not to willful neglect, the Company files a description of each asset that caused such failure with the IRS, and the Company disposes of the assets or otherwise complies with the asset tests within six months after the last day of the quarter in which it identifies such failure, it will pay a tax equal to the greater of $50,000 or the highest U.S.
−Removed: federal income tax rate then applicable to U.S.
−Removed: corporations (currently 21%) on the net income from the non-qualifying assets during the period in which it failed to satisfy the asset tests in order to remain qualified as a REIT.
−Removed: • if the Company fails to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, and such failure is due to reasonable cause and not to willful neglect, it will be required to pay a penalty of $50,000 for each such failure in order to remain qualified as a REIT.
−Removed: • if the Company fails to distribute during a calendar year at least the sum of:
−Removed: (i) 85% of its REIT ordinary income for the year;
−Removed: (ii) 95% of its REIT capital gain net income for the year;
−Removed: and (iii) any undistributed taxable income required to be distributed from earlier periods, the Company will pay a 4% nondeductible excise tax on the excess of the required distribution over the amount it actually distributed, plus any retained amounts on which income tax has been paid at the corporate level.
−Removed: • the Company may elect to retain and pay income tax on its net long-term capital gain.
−Removed: In that case, to the extent that the Company made a timely designation of such gain, a U.S.
−Removed: stockholder would be taxed on its proportionate share of the Company’s undistributed long-term capital gain and would receive a credit or refund for its proportionate share of the tax the Company paid.
−Removed: • the Company will be subject to a 100% excise tax on transactions with a TRS that are not conducted on an arm’s-length basis.
−Removed: • if the Company acquires any asset from a non-REIT C corporation in a merger or other transaction in which the Company acquires a basis in the asset that is determined by reference either to the non-REIT C corporation’s basis in the asset or to another asset, the Company will pay tax at the highest regular corporate rate applicable if it recognizes gain on the sale or disposition of the asset during the five-year period after it acquires the asset,
−Removed: provided no election is made for the transaction to be taxable on a current basis.
−Removed: This tax will generally apply to gain recognized with respect to assets that the Company holds as of the effective date of its REIT election (January 1, 2017) if such gain is recognized during the five-year period following such effective date or it may apply if the Company were to engage in (or, potentially, become a successor to an entity that had engaged in) a tax-free spin-off transaction under Section 355 of the Code within 5 years of such effective date.
−Removed: The amount of gain on which the Company would pay tax in the foregoing circumstances is the lesser of:
−Removed: • the amount of gain that the Company recognizes at the time of the sale or disposition (or would have recognized if, at the time of a spin-off transaction described above, the Company had disposed of the applicable asset);
−Removed: • the amount of gain that the Company would have recognized if it had sold the asset at the time the Company acquired it, assuming that the non-REIT C corporation will not elect in lieu of this treatment an immediate tax when the asset is acquired.
−Removed: • the Company may be required to pay monetary penalties to the IRS in certain circumstances, including if it fails to meet recordkeeping requirements intended to monitor its compliance with rules relating to the composition of a REIT’s stockholders, as described below in the section entitled “—Requirements for Qualification—Recordkeeping Requirements.”
−Removed: • the earnings of the Company’s lower-tier entities that are subchapter C corporations, excluding any qualified REIT subsidiaries, which we refer to as QRSs, but including domestic TRSs, are subject to U.S.
−Removed: federal corporate income tax.
−Removed: In addition, the Company and its subsidiaries may be subject to a variety of taxes, including payroll taxes and state, local and foreign income, property and other taxes on its assets and operations.
−Removed: The Company could also be subject to tax in situations and on transactions not presently contemplated.
−Removed: Moreover, as described further below, the Company’s TRSs will be subject to U.S.
−Removed: federal, state and local corporate income tax on their taxable income.
−Removed: Due to the nature of the assets in which the Company invests, the Company’s TRSs have, and the Company expects the TRSs will continue to have, a material amount of assets and net taxable income.
−Removed: Requirements for Qualification
−Removed: A REIT is a corporation, trust or association that meets each of the following requirements:
−Removed: It is managed by one or more trustees or directors.
−Removed: Its beneficial ownership is evidenced by transferable shares or by transferable certificates of beneficial interest.
−Removed: It would be taxable as a domestic corporation but for the REIT provisions of the U.S.
−Removed: federal income tax laws.
−Removed: It is neither a financial institution nor an insurance company subject to special provisions of the U.S.
−Removed: federal income tax laws.
−Removed: At least 100 persons are beneficial owners of its shares or ownership certificates.
−Removed: Not more than 50% in value of its outstanding shares or ownership certificates is owned, directly or indirectly, by five or fewer individuals, which the Code defines to include certain entities, during the last half of any taxable year.
−Removed: It elects to be a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to elect and maintain REIT status.
−Removed: It meets certain other qualification tests, described below, regarding the nature of its income and assets and the amount of its distributions to stockholders.
−Removed: It uses a calendar year for U.S.
−Removed: federal income tax purposes.
−Removed: The Company must meet requirements 1 through 4, 8 and 9 during its entire taxable year and must meet requirement 5 during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months.
−Removed: Requirements 5 and 6 began applying to the Company with its 2018 taxable year.
−Removed: If the Company complies with all the requirements for ascertaining the ownership of its outstanding shares in a taxable year and has no reason to know that it violated requirement 6, it will be deemed to have satisfied requirement 6 for that taxable year.
−Removed: For purposes of determining share ownership under requirement 6, an “individual” generally includes a supplemental unemployment compensation benefits plan, a private foundation or a portion of a trust permanently set aside or used exclusively for charitable purposes.
−Removed: An “individual,” however, generally does not include a trust that is a qualified employee pension or profit-sharing trust under the U.S.
−Removed: federal income tax laws, and beneficiaries of such a trust will be treated as holding our stock in proportion to their actuarial interests in the trust for purposes of requirement 6.
−Removed: The Company expects
−Removed: to issue sufficient stock with sufficient diversity of ownership to satisfy requirements 5 and 6.
−Removed: In addition, the Company’s charter restricts the ownership and transfer of our stock so that it should continue to satisfy these requirements.
−Removed: To monitor compliance with the stock ownership requirements, we are generally required to maintain records regarding the actual ownership of our stock.
−Removed: To do so, we must demand written statements each year from the record holders of significant percentages of our stock pursuant to which the record holders must disclose the actual owners of the stock (i.e., the persons required to include in gross income the dividends paid by us).
−Removed: We must maintain a list of those persons failing or refusing to comply with this demand as part of our records.
−Removed: We could be subject to monetary penalties if we fail to comply with these recordkeeping requirements.
−Removed: A stockholder that fails or refuses to comply with the demand is required by Treasury Regulations to submit a statement with its tax return disclosing the actual ownership of our stock and other information.
−Removed: For purposes of requirement 9, we have adopted December 31 as our year end, and thereby satisfy this requirement.
−Removed: Relief from Violations;
−Removed: Reasonable Cause
−Removed: The Internal Revenue Code provides relief from violations of the REIT gross income requirements, as described below under “—Requirements for Qualification—Gross Income Tests,” in cases where a violation is due to reasonable cause and not to willful neglect, and other requirements are met, including the payment of a penalty tax that is based upon the magnitude of the violation.
−Removed: In addition, certain provisions of the Internal Revenue Code extend similar relief in the case of certain violations of the REIT asset requirements (see “—Requirements for Qualification—Asset Tests” below) and other REIT requirements, again provided that the violation is due to reasonable cause and not willful neglect, and other conditions are met, including the payment of a penalty tax.
−Removed: If we did not have reasonable cause for a failure, we would fail to qualify as a REIT.
−Removed: Whether we would have reasonable cause for any such failure cannot be known with certainty because the determination of whether reasonable cause exists depends on the facts and circumstances at the time and we cannot provide any assurance that we in fact would have reasonable cause for a particular failure or that the IRS would not successfully challenge our view that a failure was due to reasonable cause.
−Removed: Moreover, we may be unable to actually rectify a failure and restore asset test compliance within the required timeframe due to the inability to transfer or otherwise dispose of assets, including as a result of restrictions on transfer imposed by our lenders or undertakings with our co-investors and/or the inability to acquire additional qualifying assets due to transaction risks, access to additional capital or other considerations.
−Removed: If we fail to satisfy any of the various REIT requirements, there can be no assurance that these relief provisions would be available to enable us to maintain our qualification as a REIT, and, if such relief provisions are available, the amount of any resultant penalty tax could be substantial.
−Removed: Effect of Subsidiary Entities
−Removed: Qualified REIT Subsidiaries.
−Removed: A corporation that is a QRS is not treated as a corporation separate from its parent REIT.
−Removed: All assets, liabilities and items of income, deduction and credit of a QRS are treated as assets, liabilities and items of income, deduction and credit of the REIT.
−Removed: A QRS is a corporation, other than a TRS, all the stock of which is owned by the REIT.
−Removed: Thus, in applying the requirements described herein, any QRS that the Company owns will be ignored, and all assets, liabilities and items of income, deduction and credit of such subsidiary will be treated as the Company’s assets, liabilities and items of income, deduction and credit.
−Removed: Other Disregarded Entities and Partnerships.
−Removed: An unincorporated domestic entity, such as a partnership or limited liability company, that has a single owner for U.S.
−Removed: federal income tax purposes generally is not treated as an entity separate from its owner for U.S.
−Removed: federal income tax purposes.
−Removed: An unincorporated domestic entity with two or more owners is generally treated as a partnership for U.S.
−Removed: federal income tax purposes.
−Removed: In the case of a REIT that is a partner in a partnership that has other partners, the REIT is treated as owning its proportionate share of the assets of the partnership and as earning its allocable share of the gross income of the partnership for purposes of the applicable REIT qualification tests.
−Removed: Thus, the Company’s proportionate share of the assets, liabilities and items of income of DigitalBridge Operating Company, LLC, which we refer to as the Operating Partnership, and any other partnership, joint venture or limited liability company that is treated as a partnership for U.S.
−Removed: federal income tax purposes in which it has acquired or will acquire an interest, directly or indirectly, or a subsidiary partnership, will be treated as its assets and gross income for purposes of applying the various REIT qualification requirements.
−Removed: For purposes of the 10% value test (described in the section entitled “—Asset Tests”), the Company’s proportionate share is based on its proportionate interest in the equity interests and certain debt securities issued by the partnership.
−Removed: For all of the other asset and income tests, the Company’s proportionate share is based on its proportionate interest in the capital of the partnership.
−Removed: The Company holds and expects to acquire limited partner or non-managing member interests in partnerships and limited liability companies that are joint ventures or investment funds.
−Removed: If a partnership or limited liability company in which the Company owns a direct or indirect interest takes or expects to take actions that could jeopardize its qualification as a REIT or require it to pay tax, the Company may be forced to dispose of its interest in such entity.
−Removed: In addition, it is possible that a partnership or limited liability company could take an action which could cause the Company to fail a REIT gross
−Removed: income or asset test, and that the Company would not become aware of such action in time to dispose of its interest in the partnership or limited liability company or take other corrective action on a timely basis.
−Removed: In that case, the Company could fail to qualify as a REIT unless it was able to qualify for a statutory REIT “savings” provision, which may require it to pay a significant penalty tax to maintain its REIT qualification.
−Removed: Taxable REIT Subsidiaries.
−Removed: A REIT may own up to 100% of the stock of one or more TRSs.
−Removed: A TRS is a fully taxable corporation that may earn income that would not be qualifying income if earned directly by its parent REIT or through a disregarded or partnership subsidiary.
−Removed: The subsidiary corporation and the REIT must jointly elect to treat the subsidiary as a TRS.
−Removed: Any corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS.
−Removed: A REIT is not treated as holding the assets of a TRS or as receiving any income that the TRS earns.
−Removed: Rather, the stock issued by the TRS is an asset in the hands of the parent REIT and the REIT recognizes as income the dividends, if any, that it receives from the TRS.
−Removed: This treatment can affect the income and asset test calculations that apply to the REIT.
−Removed: Because a parent REIT does not include the assets and income of such TRSs in determining the parent REIT’s compliance with the REIT requirements, TRSs may be used by the parent REIT to undertake indirectly activities that the REIT rules might otherwise preclude it from doing directly or through pass-through subsidiaries (for example, activities that give rise to certain categories of income such as management fees).
−Removed: However, an entity will not qualify as a TRS if it directly or indirectly operates or manages a lodging or health care facility or, generally, provides rights to any brand name under which any lodging or health care facility is operated, unless such rights are provided to an “eligible independent contractor” to operate or manage a lodging facility or a health care facility if such rights are held by the TRS as a franchisee, licensee or in a similar capacity and such lodging facility or health care facility is either owned by the TRS or leased to the TRS by its parent REIT.
−Removed: A TRS will not be considered to operate or manage a qualified lodging facility or a qualified health care property solely because the TRS directly or indirectly possesses a license, permit or similar instrument enabling it to do so.
−Removed: Additionally, a TRS will not be considered to operate or manage a qualified lodging facility or qualified health care property located outside of the United States, as long as an “eligible independent contractor” is responsible for the daily supervision and direction of such individuals on behalf of the TRS pursuant to a management agreement or similar service contract.
−Removed: An “eligible independent contractor” is, generally, with respect to any qualified lodging facility or qualified health care property, any independent contractor (as defined in Section 856(d)(3) of the Code) if, at the time such contractor enters into a management agreement or other similar service contract with the TRS to operate such qualified lodging facility or qualified health care property, such contractor (or any related person) is actively engaged in the trade or business of operating qualified lodging facilities or qualified health care properties, respectively, for any person who is not a related person with respect to the parent REIT or the TRS.
−Removed: The Company may lease qualified health care properties or qualified lodging facilities to a TRS of the Company, which TRS will, in turn, engage “eligible independent contractors” to operate such properties.
−Removed: We may also own health care properties or lodging facilities through a TRS, which would engage “eligible independent contractors” to operate such facilities.
−Removed: We have taken, and will continue to take, all steps reasonably practicable to ensure that no TRS will engage in “operating” or “managing” its health care properties or lodging facilities and that the management companies engaged to operate such health care properties or lodging facilities will qualify as “eligible independent contractors.”
−Removed: Domestic TRSs are subject to U.S.
−Removed: federal income tax, and state and local income tax, where applicable, on their taxable income.
−Removed: To the extent that a domestic TRS is required to pay taxes, it will have less cash available for distribution to the Company.
−Removed: If dividends are paid to the Company by its domestic TRSs, then the dividends it pays to our stockholders who are taxed at individual rates, up to the amount of dividends it receives from its domestic TRSs, will generally be eligible to be taxed at the reduced 20% rate applicable to qualified dividend income.
−Removed: The TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation.
−Removed: Further, the rules impose a 100% excise tax on transactions between a TRS and its parent REIT or the REIT’s tenants that are not conducted on an arm’s-length basis.
−Removed: See “—Interest Deduction Limitation.”
−Removed: We hold a significant amount of assets in one or more TRSs, and are subject to the limitation that securities in TRSs may not represent more than 20% (25% with respect our taxable year ended December 31, 2017) of the value of the Company’s total assets.
−Removed: There can be no assurance that we will be able to comply with the 20% or 25% limitations.
−Removed: In general, the Company intends that any loans that are originated or acquired with an intention of selling such loans in a manner that might expose us to a 100% tax on “prohibited transactions” if originated or acquired by us directly, will instead be originated or acquired by a TRS.
−Removed: Refer to the section entitled “—Gross Income Tests—Prohibited Transactions.” It is possible that such a TRS through which sales of securities are made may be treated as a “dealer” for U.S.
−Removed: federal income tax purposes.
−Removed: As a dealer, a TRS would generally mark all the securities it holds on the last day of each taxable year to their market value, and will recognize ordinary income or loss on such securities with respect to such
−Removed: taxable year as if they had been sold for that value on that day.
−Removed: In addition, a TRS may further elect to be subject to the mark-to-market regime described above in the event that the TRS is properly classified as a “trader” as opposed to a “dealer” for U.S.
−Removed: federal income tax purposes.
−Removed: We have made, and expect to continue to make, TRS elections with respect to certain foreign TRSs, including any issuers of collateralized debt obligations and other foreign TRSs.
−Removed: The Code and Treasury Regulations promulgated thereunder provide a specific exemption from U.S.
−Removed: federal income tax to non-U.S.
−Removed: corporations that restrict their activities in the United States to trading in stocks and securities (or any other activity closely related thereto) for their own account, whether such trading (or such other activity) is conducted by the corporation or its employees through a resident broker, commission agent, custodian or other agent.
−Removed: The Company’s foreign TRSs intend to rely on such exemption and do not intend to operate so as to be subject to U.S.
−Removed: federal income tax on their net income.
−Removed: Therefore, despite their status as TRSs, the Company’s foreign TRSs generally would not be subject to U.S.
−Removed: federal corporate income tax on their earnings.
−Removed: No assurance can be given, however, that the IRS will not challenge this treatment.
−Removed: If the IRS were to succeed in such a challenge, then it could greatly reduce the amounts that the Company’s foreign TRSs would have available to distribute to the Company and to pay to their creditors.
−Removed: Notwithstanding these rules, any gain recognized by a foreign corporation with respect to U.S.
−Removed: real property is subject to U.S.
−Removed: tax as if the foreign corporation were a U.S.
−Removed: It is not anticipated that our foreign TRSs will hold U.S.
−Removed: real property other than by foreclosure.
−Removed: Nevertheless, gain (if any) realized on foreclosed U.S.
−Removed: real property would be subject to U.S.
−Removed: stockholders of certain non-U.S.
−Removed: corporations, such as the Company’s foreign TRSs, are required to include in their income currently their proportionate share of the earnings of such a corporation, whether or not such earnings are distributed.
−Removed: We generally will be required to include in income, on a current basis, the earnings of its foreign TRSs.
−Removed: For a discussion of the treatment of the income inclusions from the Company’s foreign TRSs under the gross income tests, refer to the section entitled “—Gross Income Tests.”
−Removed: Subsidiary REITs.
−Removed: We own interests (directly or indirectly) in one or more entities that qualify as REITs.
−Removed: We believe that each such REIT has operated, and will continue to operate, in a manner to permit us to qualify for taxation as a REIT for U.S.
−Removed: federal income tax purposes and that stock in any such REIT will thus be a qualifying asset for purposes of the 75% asset test.
−Removed: However, if any such REIT fails to qualify as a REIT then (i) the entity would become subject to regular corporate income tax, as described herein (refer below to the section entitled “—Failure to Qualify”) and (ii) the Company’s equity interest in such entity would cease to be a qualifying real estate asset for purposes of the 75% asset test and, if our protective TRS elections were ineffective, would become subject to the 5% asset test and the 10% vote or value test generally applicable to the Company’s ownership in corporations other than REITs, QRSs or TRSs (refer below to the section entitled “—Asset Tests”).
−Removed: If such an entity failed to qualify as a REIT, it is possible that we would not meet the 75% asset test, the 5% asset test, and/or the 10% vote or value test with respect to its interest in such entity, in which event we would fail to qualify as a REIT, unless we qualify for certain relief provisions.
−Removed: Taxable Mortgage Pools.
−Removed: An entity, or a portion of an entity, may be classified as a taxable mortgage pool, which we refer to as a TMP, under the Code if:
−Removed: • substantially all of its assets consist of debt obligations or interests in debt obligations;
−Removed: • more than 50% of those debt obligations are real estate mortgages or interests in real estate mortgages as of specified testing dates;
−Removed: • the entity has issued debt obligations that have two or more maturities;
−Removed: • the payments required to be made by the entity on its debt obligations “bear a relationship” to the payments to be received by the entity on the debt obligations that it holds as assets.
−Removed: Under the Treasury Regulations, if less than 80% of the assets of an entity (or a portion of an entity) consists of debt obligations, these debt obligations are considered not to comprise “substantially all” of its assets and therefore the entity would not be treated as a TMP.
−Removed: Financing arrangements entered into, directly or indirectly, by the Company may give rise to TMPs, with the consequences described in the next paragraph.
−Removed: A TMP generally is treated as a corporation for U.S.
−Removed: federal income tax purposes.
−Removed: However, special rules apply to a REIT, a portion of a REIT, or a QRS that is a TMP.
−Removed: If a REIT owns directly, or indirectly through one or more QRSs or other entities that are disregarded as separate entities for U.S.
−Removed: federal income tax purposes, 100% of the equity interests in the TMP, the TMP will be a QRS and, therefore, ignored as an entity separate from the REIT for U.S.
−Removed: federal income tax purposes and would not generally affect the tax qualification of the REIT.
−Removed: It is possible that, based on future financing structures or investments, we would have a QRS that is a TMP or a subsidiary that is a REIT and a TMP or a separate corporation that is taxable as a corporation.
−Removed: If the Company has an investment in an arrangement that is classified as a TMP, that TMP arrangement will be subject to tax as a separate corporation unless the Company owns 100% of the equity in such TMP arrangement so that it is treated as a QRS, as discussed above.
−Removed: Whether an arrangement is or is not a TMP may not be susceptible to precise determination.
−Removed: If an investment in which the Company owns an interest is characterized as a TMP and thus as a separate corporation, the Company will satisfy the 100% ownership requirement only so long as it owns all classes of securities that for tax purposes are characterized as equity, which is often an uncertain factual issue and in any event is unlikely in the Company’s case given that it expects to generally hold its assets through the Company’s Operating Partnership.
−Removed: Accordingly, if an investment in which the Company owns an interest is characterized as a TMP that does not qualify as a QRS, the Company may be unable to comply with the REIT asset tests that restrict its ability to own most corporations.
−Removed: Tax-exempt investors, regulated investment company or REIT investors, non-U.S.
−Removed: investors and taxpayers with net operating losses should carefully consider the tax consequences described above, and are urged to consult their tax advisors.
−Removed: Gross Income Tests
−Removed: The Company must satisfy two gross income tests annually to qualify as a REIT.
−Removed: First, at least 75% of the Company’s gross income for each taxable year must consist of defined types of income that it derives, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income.
−Removed: Qualifying income for purposes of the 75% gross income test generally includes:
−Removed: • rents from real property;
−Removed: • interest on debt secured by mortgages on real property or on interests in real property;
−Removed: • dividends or other distributions on, and gain from the sale of, shares in other REITs;
−Removed: • gain from the sale of real estate assets;
−Removed: • income and gain derived from foreclosure property;
−Removed: • income derived from a REMIC in proportion to the real estate assets held by the REMIC, unless at least 95% of the REMIC’s assets are real estate assets, in which case all of the income derived from the REMIC;
−Removed: • income derived from the temporary investment of new capital that is attributable to the issuance of our stock or a public offering of our debt with a maturity date of at least five years that is received during the one-year period beginning on the date on which we received such new capital.
−Removed: Although a debt instrument issued by a “publicly offered REIT” ( i.e ., a REIT that is required to file annual and periodic reports with the SEC under the Exchange Act) is treated as a “real estate asset” for purposes of the asset tests, the interest income and gain from the sale of such debt instruments is not treated as qualifying income for the 75% gross income test unless the debt instrument is secured by real property or an interest in real property.
−Removed: Second, in general, at least 95% of the Company’s gross income for each taxable year must consist of income that is qualifying income for purposes of the 75% gross income test, other types of interest and dividends, gain from the sale or disposition of stock or securities or any combination of these.
−Removed: For purposes of the 95% gross income test, gain from the sale of securities includes gain from the sale of a debt instrument issued by a “publicly offered REIT” even if not secured by real property or an interest in real property.
−Removed: Gross income from the sale of property that the Company holds primarily for sale to customers in the ordinary course of business and cancellation of indebtedness, which we refer to as COD, income is excluded from both the numerator and the denominator in both income tests.
−Removed: Income and gain from “qualified hedging transactions,” as defined below in “—Hedging Transactions,” that are clearly and timely identified as such are excluded from both the numerator and the denominator for purposes of the 75% and 95% gross income tests.
−Removed: In addition, certain foreign currency gains are excluded from gross income for purposes of one or both of the gross income tests.
−Removed: Refer below to the section entitled “—Foreign Currency Gain.” The following paragraphs discuss the specific application of the gross income tests to the Company.
−Removed: Rents from Real Property
−Removed: Rent that the Company receives from its real property will qualify as “rents from real property” which is qualifying income for purposes of the 75% and 95% gross income tests, only if the following conditions are met:
−Removed: • First, the rent must not be based, in whole or in part, on the income or profits of any person.
−Removed: However, an amount received or accrued generally will not be excluded from rents from real property solely by reason of being based on fixed percentages of receipts or sales.
−Removed: • Second, rents the Company receives from a “related party tenant” will not qualify as rents from real property in satisfying the gross income tests unless the tenant is a TRS, and either:
−Removed: (i) at least 90% of the property is leased to unrelated tenants and the rent paid by the TRS is substantially comparable to the rent paid by the unrelated
−Removed: tenants for comparable space;
−Removed: or (ii) the TRS leases a qualified lodging facility or qualified health care property and engages an eligible independent contractor, as defined above in “—Taxable REIT Subsidiaries,” to operate such facility or property on its behalf.
−Removed: A tenant is a related party tenant if the REIT, or an actual or constructive owner of 10% or more of the REIT, actually or constructively owns 10% or more of the tenant.
−Removed: • Third, if rent attributable to personal property leased in connection with a lease of real property is 15% or less of the total rent received under the lease, then the rent attributable to personal property will qualify as rents from real property.
−Removed: However, if the 15% threshold is exceeded, the rent attributable to personal property will not qualify as rents from real property.
−Removed: • Fourth, the Company generally must not operate or manage its real property or furnish or render services to its tenants, other than through an “independent contractor” who is adequately compensated and from whom the Company does not derive revenue.
−Removed: However, the Company may provide services directly to tenants if the services are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not considered to be provided for the tenants’ convenience.
−Removed: In addition, the Company may provide a minimal amount of “noncustomary” services to the tenants of a property, other than through an independent contractor, as long as its income from the services (valued at not less than 150% of the Company’s direct cost of performing such services) does not exceed 1% of its income from the related property.
−Removed: Furthermore, the Company may own up to 100% of the stock of a TRS which may provide customary and noncustomary services to its tenants without tainting the rental income for the related properties.
−Removed: Refer to the section entitled “—Taxable REIT Subsidiaries.”
−Removed: Unless the Company determines that the resulting non-qualifying income under any of the following circumstances, taken together with all other non-qualifying income earned by it in the taxable year, will not jeopardize its qualification as a REIT, the Company does not intend to:
−Removed: • derive rental income attributable to personal property other than personal property leased in connection with the lease of real property, the amount of which is less than 15% of the total rent received under the lease;
−Removed: • rent any property to a related party tenant, including, except with respect to qualified health care properties and qualified lodging facilities, a TRS;
−Removed: • charge rent for any property that is based in whole or in part on the income or profits of any person, except by reason of being based on a fixed percentage or percentages of receipts or sales, as described above;
−Removed: • directly perform services considered to be noncustomary or provided for the tenant’s convenience.
−Removed: With respect to any health care properties and lodging facilities leased by the Company to one of its TRSs, for the rent paid pursuant to the leases to constitute “rents from real property,” the leases must be respected as true leases for U.S.
−Removed: federal income tax purposes.
−Removed: Accordingly, the leases cannot be treated as service contracts, joint ventures or some other type of arrangement.
−Removed: The determination of whether the leases are true leases for U.S.
−Removed: federal income tax purposes depends upon an analysis of all the surrounding facts and circumstances.
−Removed: In making such a determination, courts have considered a variety of factors, including the following:
−Removed: • the intent of the parties;
−Removed: • the form of the agreement;
−Removed: • the degree of control over the property that is retained by the property owner (for example, whether the lessee has substantial control over the operation of the property or whether the lessee was required simply to use its best efforts to perform its obligations under the agreement);
−Removed: • the extent to which the property owner retains the risk of loss with respect to the property (for example, whether the lessee bears the risk of increases in operating expenses or the risk of damage to the property) or the potential for economic gain with respect to the property.
−Removed: In addition, Section 7701(e) of the Code provides that a contract that purports to be a service contract or a partnership agreement is treated instead as a lease of property if the contract is properly treated as such, taking into account all relevant factors.
−Removed: Since the determination of whether a service contract should be treated as a lease is inherently factual, the presence or absence of any single factor may not be dispositive in every case.
−Removed: The Company has structured, and will continue to structure, its health care property and lodging facility leases to qualify as true leases for U.S.
−Removed: federal income tax purposes.
−Removed: For example, with respect to the leases, generally:
−Removed: • the property owning entity and the lessee intend for their relationship to be that of a lessor and lessee, and such relationship will be documented by a lease agreement;
−Removed: • the lessee has the right to exclusive possession and use and quiet enjoyment of the property covered by the lease during the term of the lease;
−Removed: • the lessee bears the cost of, and is responsible for, day-to-day maintenance and repair of the property other than the cost of certain capital expenditures, and dictates through the property manager, who works for the lessee during the terms of the lease, how the property is operated and maintained;
−Removed: • the lessee bears all of the costs and expenses of operating the property, including the cost of any inventory used in their operation, during the term of the lease, other than the cost of certain furniture, fixtures and equipment, and certain capital expenditures;
−Removed: • the lessee benefits from any savings and bears the burdens of any increases in the costs of operating the property during the term of the lease;
−Removed: • in the event of damage or destruction to a property, the lessee will be at economic risk because it will bear the economic burden of the loss in income from operation of the property subject to the right, in certain circumstances, to terminate the lease if the lessor does not restore the property to its prior condition;
−Removed: • the lessee generally indemnifies the lessor against all liabilities imposed on the lessor during the term of the lease by reason of (A) injury to persons or damage to property occurring at the property or (B) the lessee’s use, management, maintenance or repair of the property;
−Removed: • the lessee is obligated to pay, at a minimum, substantial base rent for the period of use of the property under the lease;
−Removed: • the lessee stands to incur substantial losses or reap substantial gains depending on how successfully it, through the property manager, who works for the lessee during the terms of the leases, operates the property;
−Removed: • the lease enables the tenant to derive a meaningful profit, after expenses and taking into account the risks associated with the lease, from the operation of the property during the term of the lease;
−Removed: • upon termination of the lease, the property will be expected to have a remaining useful life equal to at least 20% of its expected useful life on the date the lease is entered into, and a fair market value equal to at least 20% of its fair market value on the date the lease was entered into.
−Removed: If, however, a lease were recharacterized as a service contract or partnership agreement, rather than a true lease, or disregarded altogether for tax purposes, all or part of the payments that the lessor receives from the lessee would not be considered rent and would not otherwise satisfy the various requirements for qualification as “rents from real property.”
−Removed: As indicated above, “rents from real property” must not be based in whole or in part on the income or profits of any person.
−Removed: The Company intends to structure its health care property and lodging facility leases such that the leases provide for periodic payments of a specified base rent plus, to the extent that it exceeds the base rent, additional rent which is calculated based upon the gross revenues of the facilities subject to the lease, plus certain other amounts.
−Removed: Payments made pursuant to these leases should qualify as “rents from real property” since they are generally based on either fixed dollar amounts or on specified percentages of gross sales fixed at the time the leases were entered into.
−Removed: The foregoing assumes that the leases will not be renegotiated during their term in a manner that has the effect of basing either the percentage rent or base rent on income or profits.
−Removed: The foregoing also assumes that the leases are not in reality used as a means of basing rent on income or profits.
−Removed: More generally, the rent payable under the leases will not qualify as “rents from real property” if, considering the leases and all the surrounding circumstances, the arrangement does not conform with normal business practice.
−Removed: It is the Company’s intention not to renegotiate the percentages used to determine the percentage rent during the terms of the leases in a manner that has the effect of basing rent on income or profits.
−Removed: In addition, the Company intends to structure its leases to ensure that the rental provisions and other terms of the leases conform with normal business practice and are not intended to be used as a means of basing rent on income or profits.
−Removed: The Company expects to lease certain items of personal property to its TRS lessees in connection with its lodging facility leases.
−Removed: Under the Code, if a lease provides for the rental of both real and personal property and the portion of the rent attributable to personal property is 15% or less of the total rent due under the lease, then all rent paid pursuant to such lease qualifies as “rents from real property.” If, however, a lease provides for the rental of both real and personal property, and the portion of the rent attributable to personal property exceeds 15% of the total rent due under the lease, then no portion of the rent that is attributable to personal property will qualify as “rents from real property.” The amount of rent attributable to personal property is the amount that bears the same ratio to total rent for the taxable year as the average of the fair market value of the personal property at the beginning and end of the year bears to the average of the aggregate fair market value of both the real and personal property at the beginning and end of such year.
−Removed: The Company expects that, with respect to its lodging facility leases, either the amount of rent attributable to personal property will not exceed 15% of the total rent due under the lease (determined under the law in effect for the applicable period), or, if the rent attributable to personal property constitutes non-qualifying income, such amounts, when taken together with all other non-qualifying income earned by the Company, will not jeopardize its qualification as a REIT.
−Removed: The term “interest,” as defined for purposes of both gross income tests, generally excludes any amount that is based, in whole or in part, on the income or profits of any person.
−Removed: However, interest generally includes the following:
−Removed: • an amount that is based on a fixed percentage or percentages of receipts or sales;
−Removed: • an amount that is based on the income or profits of a debtor, as long as the debtor derives substantially all of its income from the real property securing the debt from leasing substantially all of its interest in the property and only to the extent that the amounts received by the debtor would be qualifying “rents from real property” if received directly by a REIT.
−Removed: If a loan contains a provision that entitles a REIT to a percentage of the borrower’s gain upon the sale of the real property securing the loan or a percentage of the appreciation in the property’s value as of a specific date, income attributable to that loan provision will be treated as gain from the sale of the property securing the loan, which generally is qualifying income for purposes of both gross income tests, provided that the property is not inventory or dealer property in the hands of the borrower or the REIT.
−Removed: Interest on debt secured by mortgages on real property or on interests in real property (including, in the case of a loan secured by real property and personal property, such personal property to the extent that it does not exceed 15% of the total fair market value of all such property securing the loan), including, for this purpose, prepayment penalties, loan assumption fees and late payment charges that are not compensation for services, generally is qualifying income for purposes of the 75% gross income test.
−Removed: In general, under applicable Treasury Regulations, if a loan is secured by real property and other property and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan determined as of:
−Removed: (i) the date the Company agreed to acquire or originate the loan;
−Removed: or (ii) as discussed further below, in the event of a “significant modification,” the date the Company modified the loan, then a portion of the interest income from such loan will not be qualifying income for purposes of the 75% gross income test, but will be qualifying income for purposes of the 95% gross income test.
−Removed: The portion of the interest income that will not be qualifying income for purposes of the 75% gross income test will be equal to the portion of the principal amount of the loan that is not secured by real property—that is, the amount by which the loan exceeds the value of the real property that is security for the loan.
−Removed: As discussed further below, IRS guidance provides that the Company does not need to redetermine fair market value of the real property securing the loan in connection with a loan modification that is occasioned by a borrower default or made at a time when the Company reasonably believes that the modification to the loan will substantially reduce a significant risk of default on the loan.
−Removed: The Company may invest in loans secured by real property that is under construction or being significantly improved, in which case the value of the real estate that is security for the loan will be the fair market value of the land plus the reasonably estimated cost of the improvements or developments (including, in the case of a loan secured by real property and personal property, such personal property to the extent that it does not exceed 15% of the total fair market value of all such property securing the loan) which will secure the loans and which are to be constructed from proceeds of the loan.
−Removed: The Company holds certain mezzanine loans and may originate or acquire other mezzanine loans.
−Removed: Mezzanine loans are loans secured by equity interests in an entity that directly or indirectly owns real property, rather than by a direct mortgage of the real property.
−Removed: In Revenue Procedure 2003-65, the IRS established a safe harbor under which loans secured by a first priority security interest in ownership interests in a partnership or limited liability company owning real property will be treated as real estate assets for purposes of the REIT asset tests described below, and interest derived from those loans will be treated as qualifying income for both the 75% and 95% gross income tests, provided several requirements are satisfied.
−Removed: Although Revenue Procedure 2003-65 provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law.
−Removed: Moreover, the Company expects that some of its mezzanine loans may not meet all of the requirements for reliance on the safe harbor.
−Removed: To the extent any mezzanine loans that the Company originates or acquires do not qualify for the safe harbor described above, the interest income from the loans will be qualifying income for purposes of the 95% gross income test, but there is a risk that such interest income will not be qualifying income for purposes of the 75% gross income test.
−Removed: We believe that we currently invest in mezzanine loans, and intend to continue to invest in mezzanine loans, in a manner that will enable us to satisfy the REIT gross income and asset tests.
−Removed: The Company and its subsidiaries hold certain participation interests, or subordinated mortgage interests, in mortgage loans and mezzanine loans originated by other lenders.
−Removed: A subordinated mortgage interest is an interest created in an underlying loan by virtue of a participation or similar agreement, to which the originator of the loan is a party, along with one or more participants.
−Removed: The borrower on the underlying loan is typically not a party to the participation agreement.
−Removed: The performance of a participant’s investment depends upon the performance of the underlying loan and if the underlying borrower defaults, the participant typically has no recourse against the originator of the loan.
−Removed: The originator often retains a senior position in the underlying loan and grants junior participations, which will be a first loss position in the event of a default by the borrower.
−Removed: The Company expects that its (and its subsidiaries’) participation interests generally will qualify as
−Removed: real estate assets for purposes of the REIT asset tests described below and that interest derived from such investments generally will be treated as qualifying interest for purposes of the 75% gross income test.
−Removed: The appropriate treatment of participation interests for U.S.
−Removed: federal income tax purposes is not entirely certain, however, and no assurance can be given that the IRS will not challenge the Company’s treatment of its participation interests.
−Removed: Many of the terms of the mortgage loans, mezzanine loans and subordinated mortgage interests and the loans supporting the mortgage-backed securities that the Company holds or expects to acquire have been modified and may in the future be modified.
−Removed: Under the Code, if the terms of a loan are modified in a manner constituting a “significant modification,” such modification triggers a deemed exchange of the original loan for the modified loan.
−Removed: Revenue Procedure 2014-51 provides a safe harbor pursuant to which the Company will not be required to redetermine the fair market value of the real property securing a loan for purposes of the gross income and asset tests in connection with a loan modification that is:
−Removed: (i) occasioned by a borrower default;
−Removed: or (ii) made at a time when the Company reasonably believes that the modification to the loan will substantially reduce a significant risk of default on the original loan.
−Removed: No assurance can be provided that all of the Company’s loan modifications will qualify for the safe harbor in Revenue Procedure 2014-51.
−Removed: To the extent the Company significantly modifies loans in a manner that does not qualify for that safe harbor, it will be required to redetermine the value of the real property securing the loan at the time it was significantly modified.
−Removed: In determining the value of the real property securing such a loan, the Company generally will not obtain third-party appraisals but rather will rely on internal valuations.
−Removed: No assurance can be provided that the IRS will not successfully challenge the Company’s internal valuations.
−Removed: If the terms of the Company’s mortgage loans, mezzanine loans and subordinated mortgage interests and loans supporting its mortgage-backed securities are significantly modified in a manner that does not qualify for the safe harbor in Revenue Procedure 2014-51 and the fair market value of the real property securing such loans has decreased significantly, the Company could fail the 75% gross income test, the 75% asset test and/or the 10% value test.
−Removed: The Company and its subsidiaries also hold, and may in the future, acquire distressed mortgage loans.
−Removed: Revenue Procedure 2014-51 provides that the IRS will treat distressed mortgage loans acquired by a REIT that are secured by real property and other property as producing in part non-qualifying income for the 75% gross income test.
−Removed: Specifically, Revenue Procedure 2014-51 indicates that interest income on such a distressed mortgage loan will be treated as qualifying income based on the ratio of:
−Removed: (i) the fair market value of the real property securing the debt determined as of the date the REIT committed to acquire the loan;
−Removed: and (ii) the face amount of the loan (and not the purchase price or current value of the debt).
−Removed: The face amount of a distressed mortgage loan will typically exceed the fair market value of the real property securing the mortgage loan on the date the REIT commits to acquire the loan.
−Removed: It is unclear how the safe harbor in Revenue Procedure 2014-51 is affected by the recent legislative changes regarding the treatment of personal property securing a mortgage loan.
−Removed: The Company intends to invest in distressed mortgage loans in a manner that consistent with qualifying as a REIT.
−Removed: The Company and its subsidiaries have entered into certain sale and repurchase agreements under which it nominally sells certain mortgage assets to a counterparty and simultaneously enters into an agreement to repurchase the sold assets.
−Removed: Based on positions the IRS has taken in analogous situations, the Company believes that it will be treated for purposes of the REIT gross income and asset tests (refer below to the section entitled “—Asset Tests”) as the owner of the mortgage assets that are the subject of any such agreement notwithstanding that record ownership of the assets is transferred to the counterparty during the term of the agreement.
−Removed: It is possible, however, that the IRS could assert that the Company does not own the mortgage assets during the term of the sale and repurchase agreement, in which case its ability to qualify as a REIT could be adversely affected.
−Removed: The Company may invest in other agency securities that are pass-through certificates.
−Removed: The Company expects that any such agency securities will be treated as either interests in a grantor trust or as interests in a REMIC for U.S.
−Removed: federal income tax purposes and that all interest income from such agency securities will be qualifying income for the 95% gross income test.
−Removed: In the case of agency securities treated as interests in grantor trusts, the Company would be treated as owning an undivided beneficial ownership interest in the mortgage loans held by the grantor trust.
−Removed: The interest on such mortgage loans would be qualifying income for purposes of the 75% gross income test to the extent that such loan is secured by real property, as discussed above.
−Removed: In the case of agency securities treated as interests in a REMIC, income derived from such REMIC interests generally will be treated as qualifying income for purposes of the 75% gross income test.
−Removed: As discussed above, however, if less than 95% of the assets of the REMIC are real estate assets then only a proportionate part of the income derived from the Company’s interest in the REMIC will qualify for purposes of the 75% gross income tests.
−Removed: To the extent that a REMIC interest includes an imbedded interest swap or cap contract or other derivative instrument, such derivative instrument could produce non-qualifying income for purposes of the 75% gross income test.
−Removed: The Company expects that substantially all of its income from agency securities will be qualifying income for purposes of the 75% and 95% gross income tests.
−Removed: Subpart F Income
−Removed: The Company’s share of any dividends received from any corporation (including any TRS, but excluding any REIT) in which it owns an equity interest will qualify for purposes of the 95% gross income test but not for purposes of the 75% gross income test.
−Removed: The Company’s share of any dividends received from any other REIT in which it owns an equity interest, including any subsidiary REIT, will be qualifying income for purposes of both gross income tests.
−Removed: In addition, the Company may be required to include in gross income its share of “Subpart F income” of one or more foreign (non-U.S.) corporations in which it invests, including its foreign TRSs, regardless of whether it receives distributions from such corporations.
−Removed: The Company will treat certain income inclusions received with respect to equity investments in foreign TRSs as qualifying income for purposes of the 95% gross income test but not the 75% gross income test.
−Removed: The IRS has issued private letter rulings to other taxpayers concluding that similar income inclusions will be treated as qualifying income for purposes of the 95% gross income test.
−Removed: Those private letter rulings can only be relied upon by the taxpayers to whom they were issued.
−Removed: No assurance can be provided that the IRS will not successfully challenge the Company’s treatment of such income inclusions.
−Removed: The Company expects to receive various fees in connection with its operations.
−Removed: Fee income will be qualifying income for purposes of both the 75% and 95% gross income tests if it is received in consideration for entering into an agreement to make a loan secured by mortgages on or interests in real property, and the fees are not determined by the income and profits of any person.
−Removed: Other fees, such as origination and servicing fees, fees for acting as a broker-dealer and fees for managing investments for third parties, are not qualifying income for purposes of either gross income test.
−Removed: Any fees earned by a TRS are not included for purposes of the gross income tests.
−Removed: Hedging Transactions
−Removed: From time to time, the Company and its subsidiaries expect to enter into hedging transactions with respect to one or more of its assets or liabilities.
−Removed: The Company’s hedging activities may include entering into interest rate swaps, caps and floors, options to purchase such items and futures and forward contracts.
−Removed: Income and gain from “qualified hedging transactions” are excluded from gross income for purposes of the 75% and 95% gross income tests.
−Removed: A “qualified hedging transaction” includes:
−Removed: (i) any transaction entered into in the normal course of the Company’s trade or business primarily to manage the risk of interest rate, price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets;
−Removed: (ii) any transaction entered into primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% gross income test (or any property which generates such income or gain);
−Removed: and (iii) any transaction entered into to “offset” a transaction described in (i) or (ii) if a portion of the hedged indebtedness is extinguished or the related property disposed of.
−Removed: The Company will be required to clearly identify any such hedging transaction before the close of the day on which it was acquired, originated or entered into and to satisfy other identification requirements in order to be treated as a qualified hedging transaction.
−Removed: The Company intends to structure any hedging transactions in a manner that does not jeopardize its qualification as a REIT.
−Removed: From time to time, the Company and its subsidiaries may recognize cancellation-of-debt (COD) income, in connection with repurchasing debt at a discount.
−Removed: COD income is excluded from gross income for purposes of both the 75% and 95% gross income tests.
−Removed: Foreign Currency Gain
−Removed: Certain foreign currency gain is excluded from gross income for purposes of one or both of the gross income tests.
−Removed: “Real estate foreign exchange gain” is excluded from gross income for purposes of the 75% gross income test.
−Removed: Real estate foreign exchange gain generally includes foreign currency gain attributable to any item of income or gain that is qualifying income for purposes of the 75% gross income test, foreign currency gain attributable to the acquisition or ownership of (or becoming or being the obligor under) obligations and certain foreign currency gain attributable to certain “qualified business units” of a REIT.
−Removed: “Passive foreign exchange gain” is excluded from gross income for purposes of the 95% gross income test.
−Removed: Passive foreign exchange gain generally includes real estate foreign exchange gain as described above and also includes foreign currency gain attributable to any item of income or gain that is qualifying income for purposes of the 95% gross income test and foreign currency gain attributable to the acquisition or ownership of (or becoming or being the obligor under) obligations secured by mortgages on real property or on interests in real property.
−Removed: Because passive foreign exchange gain includes real estate foreign exchange gain, real estate foreign exchange gain is excluded from gross income for purposes of both the 75% and 95% gross income tests.
−Removed: These exclusions for real estate foreign exchange gain and passive foreign exchange gain do not apply to certain foreign currency gain derived from
−Removed: dealing, or engaging in substantial and regular trading, in securities, which is treated as non-qualifying income for purposes of both the 75% and 95% gross income tests.
−Removed: Prohibited Transactions
−Removed: A REIT will incur a 100% tax on the net income derived from any sale or other disposition of property, other than foreclosure property, that the REIT holds primarily for sale to customers in the ordinary course of a trade or business.
−Removed: The Company believes that none of its assets are held or will be held primarily for sale to customers and that a sale of any of its assets has not been, and will not be, in the ordinary course of its business.
−Removed: Whether a REIT holds an asset “primarily for sale to customers in the ordinary course of a trade or business” depends, however, on the facts and circumstances in effect from time to time, including those related to a particular asset.
−Removed: A safe harbor to the characterization of the sale of property by a REIT as a prohibited transaction and the 100% prohibited transaction tax is available if the following requirements are met:
−Removed: • the REIT has held the property for not less than two years;
−Removed: • the aggregate expenditures made by the REIT, or any partner of the REIT, during the two-year period preceding the date of the sale that are includable in the basis of the property do not exceed 30% of the selling price of the property;
−Removed: (i) during the year in question, the REIT did not make more than seven sales of property other than foreclosure property or sales to which Section 1031 or 1033 of the Code applies;
−Removed: (ii) the aggregate adjusted bases of all such properties sold by the REIT during the year did not exceed 10% of the aggregate bases of all of theassets of the REIT at the beginning of the year;
−Removed: (iii) the aggregate fair market value of all such properties sold by the REIT during the year did not exceed 10% of the aggregate fair market value of all of the assets of the REIT at the beginning of the year;
−Removed: (iv)(A) the aggregate adjusted tax bases of all such properties sold by the REIT during the year did not exceed 20% of the aggregate adjusted bases of all property of the REIT at the beginning of the year and (B) the three-year average percentage of properties sold by the REIT compared to all the REIT’s properties (measured by adjusted bases) taking into account the current and two prior years did not exceed 10%;
−Removed: or (v)(A) the aggregate fair market value of all such properties sold by the REIT during the year did not exceed 20% of the aggregate fair market value of all property of the REIT at the beginning of the year and (B) the three-year average percentage of properties sold by the REIT compared to all the REIT’s properties (measured by fair market value) taking into account the current and two prior years did not exceed 10%;
−Removed: • in the case of property not acquired through foreclosure or lease termination, the REIT has held the property for at least two years for the production of rental income;
−Removed: • if the REIT has made more than seven sales of non-foreclosure property during the taxable year, substantially all of the marketing and development expenditures with respect to the property were made through an independent contractor from whom the REIT derives no income or a TRS.
−Removed: No assurance can be given that any property that the Company sells will not be treated as property held “primarily for sale to customers in the ordinary course of a trade or business” or that the Company will be able to comply with the safe harbor when disposing of assets.
−Removed: The 100% tax will not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be taxed to the corporation at regular corporate income tax rates.
−Removed: The Company intends to structure its activities to avoid transactions that would result in a material amount of prohibited transaction tax.
−Removed: Foreclosure Property
−Removed: The Company will be subject to tax at the maximum corporate rate on any income from foreclosure property, which includes certain foreign currency gains and related deductions recognized, other than income that otherwise would be qualifying income for purposes of the 75% gross income test, less expenses directly connected with the production of that income.
−Removed: However, gross income from foreclosure property will qualify under the 75% and 95% gross income tests.
−Removed: Foreclosure property is any real property, including interests in real property, and any personal property incident to such real property:
−Removed: • that is acquired by a REIT as the result of the REIT having bid on such property at foreclosure or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default or default was imminent on a lease of such property or on indebtedness that such property secured;
−Removed: • for which the related loan was acquired by the REIT at a time when the default was not imminent or anticipated;
−Removed: • for which the REIT makes a proper election to treat the property as foreclosure property.
−Removed: A REIT will not be considered to have foreclosed on a property where the REIT takes control of the property as a mortgagee-in-possession and cannot receive any profit or sustain any loss except as a creditor of the mortgagor.
−Removed: Property generally ceases to be foreclosure property at the end of the third taxable year following the taxable year in which the REIT acquired the property or longer if an extension is granted by the Secretary of the Treasury.
−Removed: However, this grace period terminates and foreclosure property ceases to be foreclosure property on the first day:
−Removed: • on which a lease is entered into for the property that, by its terms, will give rise to income that does not qualify for purposes of the 75% gross income test, or any amount is received or accrued, directly or indirectly, pursuant to a lease entered into on or after such day that will give rise to income that does not qualify for purposes of the 75% gross income test;
−Removed: • on which any construction takes place on the property, other than completion of a building or any other improvement, where more than 10% of the construction was completed before default became imminent;
−Removed: • which is more than 90 days after the day on which the REIT acquired the property and the property is used in a trade or business which is conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income or a TRS.
−Removed: The Company may acquire properties as a result of foreclosure or otherwise reducing the property to ownership when default has occurred or is imminent and may make foreclosure property elections with respect to some or all of those properties if such election is available (which may not be the case with respect to acquired “distressed loans”).
−Removed: Cash/Income Differences/Phantom Income
−Removed: Due to the nature of the assets in which the Company invests, the Company may be required to recognize taxable income from those assets in advance of its receipt of cash flow on or proceeds from disposition of such assets, and may be required to report taxable income in early periods that exceeds the economic income ultimately realized on such assets.
−Removed: The Company may acquire debt instruments in the secondary market for less than their face amount.
−Removed: The amount of such discount generally will be treated as “market discount” for U.S.
−Removed: federal income tax purposes.
−Removed: The Company may elect to include in taxable income accrued market discount as it accrues rather than as it is realized for economic purposes, resulting in phantom income.
−Removed: Principal payments on certain loans are made monthly, and consequently accrued market discount may have to be included in income each month as if the debt instrument were assured of ultimately being collected in full.
−Removed: If the Company collects less on the debt instrument than its purchase price plus the market discount it had previously reported as income, it may not be able to benefit from any offsetting loss deductions.
−Removed: The Company may acquire mortgage-backed securities that have been issued with original issue discount.
−Removed: In general, the Company will be required to accrue original issue discount based on the constant yield to maturity of the mortgage-backed security, and to treat it as taxable income in accordance with applicable U.S.
−Removed: federal income tax rules even though smaller or no cash payments are received on such debt instrument.
−Removed: As in the case of the market discount discussed in the preceding paragraph, the constant yield in question will be determined and the Company will be taxed based on the assumption that all future payments due on the mortgage-backed security in question will be made.
−Removed: If all payments on the mortgage-backed securities are not made, the Company may not be able to benefit from any offsetting loss deductions.
−Removed: In addition, pursuant to its investment strategy, the Company may acquire distressed debt instruments and subsequently modify such instruments by agreement with the borrower.
−Removed: If the amendments to the outstanding debt are “significant modifications” under the applicable Treasury Regulations, the modified debt may be considered to have been reissued to the Company in a debt-for-debt exchange with the borrower.
−Removed: In that event, the Company may be required to recognize income to the extent the principal amount of the modified debt exceeds its adjusted tax basis in the unmodified debt, and would hold the modified loan with a cost basis equal to its principal amount for U.S.
−Removed: federal tax purposes.
−Removed: To the extent that such modifications are made with respect to a debt instrument held by a TRS treated as a dealer, as described above, such a TRS would be required at the end of each taxable year, including the taxable year in which such modification was made, to mark the modified debt instrument to its fair market value as if the debt instrument were sold.
−Removed: In that case, the TRS generally would recognize a loss at the end of the taxable year in which the modifications were made to the extent the fair market value of such debt instrument were less than its principal amount after the modification.
−Removed: In addition, in the event that any debt instruments or mortgage-backed securities acquired by the Company are delinquent as to mandatory principal and interest payments, or in the event payments with respect to a particular debt instrument are not made when due, the Company may nonetheless be required to continue to recognize the unpaid interest as taxable income.
−Removed: Similarly, the Company may be required to accrue interest income with respect to subordinate mortgage-backed securities at the stated rate regardless of whether corresponding cash payments are received.
−Removed: The Company may also be required under the terms of indebtedness that it incurs to private lenders or otherwise to use cash received from interest payments to make principal payments on that indebtedness, with the effect of recognizing income but not having a corresponding amount of cash available for distribution to holders of its securities.
−Removed: Due to each of these potential timing differences between income recognition or expense deduction and cash receipts or disbursements, there is a significant risk that the Company may have substantial taxable income in excess of cash available for distribution.
−Removed: In that event, the Company may need to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which this “phantom income” is recognized.
−Removed: Refer below to the section entitled “—Distribution Requirements.”
−Removed: Failure to Satisfy the Gross Income Tests
−Removed: If the Company fails to satisfy one or both of the gross income tests for any taxable year, it nevertheless may qualify as a REIT for that year if it qualifies for relief under certain provisions of the U.S.
−Removed: federal income tax laws.
−Removed: Those relief provisions are available if:
−Removed: • the Company’s failure to meet those tests is due to reasonable cause and not to willful neglect;
−Removed: • following such failure for any taxable year, the Company files a schedule of the sources of its income with the IRS.
−Removed: The Company cannot predict, however, whether in all circumstances it would qualify for the relief provisions.
−Removed: In addition, as discussed above in the section entitled “—Taxation of DigitalBridge,” even if the relief provisions apply, the Company would incur a 100% tax on the gross income attributable to the greater of the amount by which it fails the 75% or 95% gross income test, in each case, multiplied by a fraction intended to reflect its profitability.
−Removed: To qualify as a REIT, the Company also must satisfy the following asset tests at the end of each quarter of each taxable year.
−Removed: First, at least 75% of the value of its total assets must consist of:
−Removed: • cash or cash items, including certain receivables and money market funds;
−Removed: • government securities;
−Removed: • interests in real property, including leaseholds, options to acquire real property and leaseholds, and personal property to the extent such personal property is leased in connection with real property and rents attributable to such personal property are treated as “rents from real property”;
−Removed: • interests in mortgage loans secured by real property;
−Removed: • stock in other REITs and debt instruments issued by “publicly offered REITs”;
−Removed: • investments in stock or debt instruments during the one-year period following the Company’s receipt of new capital that it raises through equity offerings or public offerings of debt with at least a five-year term;
−Removed: • regular or residual interests in a REMIC.
−Removed: However, if less than 95% of the assets of a REMIC consist of assets that are qualifying real estate-related assets under the U.S.
−Removed: federal income tax laws, determined as if the Company held such assets, the Company will be treated as holding directly its proportionate share of the assets of such REMIC.
−Removed: Second, of the Company’s investments not included in the 75% asset class, the value of its interest in any one issuer’s securities may not exceed 5% of the value of its total assets, which we refer to as the 5% asset test.
−Removed: Third, of the Company’s investments not included in the 75% asset class, it may not own more than 10% of the voting power or value of any one issuer’s outstanding securities, which we refer to as the 10% vote or value test.
−Removed: Fourth, no more than 20% (25% for our taxable year ended December 31, 2017) of the value of the Company’s total assets may consist of the securities of one or more TRSs.
−Removed: Fifth, no more than 25% of the value of the Company’s total assets may consist of securities that are not qualifying assets for purposes of the 75% asset test described above, which we refer to as the 25% securities test.
−Removed: Sixth, no more than 25% of the value of the Company’s total assets may consist of debt instruments issued by “publicly offered REITs” to the extent such debt instruments are not secured by real property or interests in real property.
−Removed: For purposes of the 5% asset test, the 10% vote or value test and the 25% securities test, the term “securities” does not include stock in another REIT, debt of a “publicly offered REIT,” equity or debt securities of a QRS or, in the case of the 5% asset test and 10% vote or value test, TRS debt or equity, mortgage loans or mortgage-backed securities that constitute real estate assets, or equity interests in a partnership.
−Removed: The term “securities,” however, generally includes debt
−Removed: securities issued by a partnership or another REIT (other than a “publicly offered REIT”), except, for purposes of the 10% value test, the term “securities” does not include:
−Removed: • “Straight debt” securities, which is defined as a written unconditional promise to pay on demand or on a specified date a sum certain in money if:
−Removed: (i) the debt is not convertible, directly or indirectly, into equity;
−Removed: and (ii) the interest rate and interest payment dates are not contingent on profits, the borrower’s discretion, or similar factors.
−Removed: “Straight debt” securities do not include any securities issued by a partnership or a corporation in which the Company or any TRS in which the Company owns more than 50% of the voting power or value of the shares hold non-”straight debt” securities that have an aggregate value of more than 1% of the issuer’s outstanding securities.
−Removed: However, “straight debt” securities include debt subject to the following contingencies:
−Removed: • a contingency relating to the time of payment of interest or principal, as long as either:
−Removed: (i) there is no change to the effective yield of the debt obligation, other than a change to the annual yield that does not exceed the greater of 0.25% or 5% of the annual yield;
−Removed: or (ii) neither the aggregate issue price nor the aggregate face amount of the issuer’s debt obligations held by the Company exceeds $1 million and no more than 12 months of unaccrued interest on the debt obligations can be required to be prepaid;
−Removed: • a contingency relating to the time or amount of payment upon a default or prepayment of a debt obligation, as long as the contingency is consistent with customary commercial practice;
−Removed: • Any loan to an individual or an estate;
−Removed: • Any “section 467 rental agreement” other than an agreement with a related party tenant;
−Removed: • Any obligation to pay “rents from real property”;
−Removed: • Certain securities issued by governmental entities;
−Removed: • Any security issued by a REIT;
−Removed: • Any debt instrument issued by an entity treated as a partnership for U.S.
−Removed: federal income tax purposes in which the Company is a partner to the extent of its proportionate interest in the equity and debt securities of the partnership;
−Removed: • Any debt instrument issued by an entity treated as a partnership for U.S.
−Removed: federal income tax purposes not described in the preceding bullet points if at least 75% of the partnership’s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test described above in the section entitled “—Gross Income Tests.”
−Removed: For purposes of the 10% value test, the Company’s proportionate share of the assets of a partnership is its proportionate interest in any securities issued by the partnership, without regard to the securities described in the last two bullet points above.
−Removed: The Company’s holdings of securities and other assets have complied, and will continue to comply, with the foregoing asset tests, and the Company intends to monitor its compliance on an ongoing basis.
−Removed: However, independent appraisals have not been obtained to support the Company’s conclusions as to the value of its assets or the value of any particular security or securities.
−Removed: Moreover, values of some assets, including instruments issued in collateralized debt obligation transactions, may not be susceptible to a precise determination, and values are subject to change in the future.
−Removed: Furthermore, the proper classification of an instrument as debt or equity for U.S.
−Removed: federal income tax purposes may be uncertain in some circumstances, which could affect the application of the asset tests.
−Removed: Accordingly, there can be no assurance that the IRS will not contend that the Company’s interests in its subsidiaries or in the securities of other issuers will not cause a violation of the asset tests.
−Removed: As described above, Revenue Procedure 2003-65 provides a safe harbor pursuant to which certain mezzanine loans secured by a first priority security interest in ownership interests in a partnership or limited liability company will be treated as qualifying assets for purposes of the 75% asset test (and therefore, are not subject to the 5% asset test and the 10% vote or value test).
−Removed: Refer to the section entitled “—Gross Income Tests.” The Company expects that some of its mezzanine loans may not qualify for that safe harbor.
−Removed: To the extent that the Company determines that a mezzanine loan likely would not qualify for the safe harbor and also would not be excluded from the definition of securities for purposes of the 10% vote or value test or could cause the Company not to satisfy the 75% or 5% assets tests, it would hold that mezzanine loan through a taxable REIT subsidiary.
−Removed: The Company owns stock in several REITS and expects to invest in the stock of other entities that intend to qualify as REITs in the future.
−Removed: The Company believes that any stock that it has acquired or will acquire in other REITs has been, or will be, qualifying assets for purposes of the 75% asset test.
−Removed: If a REIT in which the Company owns stock fails to qualify
−Removed: as a REIT in any year, however, the stock in such REIT will not be a qualifying asset for purposes of the 75% asset test.
−Removed: Instead, the Company would be subject to the 5% asset test, the 10% vote or value test and the 25% securities test described above with respect to its investment in such a disqualified REIT.
−Removed: Consequently, if a REIT in which the Company owns stock fails to qualify as a REIT, the Company could fail one or more of the asset tests described above.
−Removed: To the extent the Company invests in other REITs, it intends to do so in a manner that will enable it to continue to satisfy the REIT asset tests.
−Removed: As discussed above in the section entitled “—Gross Income Tests,” the Company and its subsidiaries may invest in distressed mortgage loans.
−Removed: In general, under the applicable Treasury Regulations, if a loan is secured by real property and other property and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan as of:
−Removed: (i) the date the Company agreed to acquire or originate the loan;
−Removed: or (ii) in the event of a significant modification, the date the Company modified the loan, then a portion of the interest income from such a loan will not be qualifying income for purposes of the 75% gross income test but will be qualifying income for purposes of the 95% gross income test.
−Removed: Although the law is not entirely clear, a portion of the loan will also likely be a non-qualifying asset for purposes of the 75% asset test.
−Removed: The non-qualifying portion of such a loan would be subject to, among other requirements, the 10% vote or value test.
−Removed: IRS Revenue Procedure 2014-51 provides a safe harbor under which the IRS has stated that it will not challenge a REIT’s treatment of a loan as being, in part, a qualifying real estate asset in an amount equal to the lesser of:
−Removed: (i) the fair market value of the loan on the relevant quarterly REIT asset testing date;
−Removed: or (ii) the greater of (A) the fair market value of the real property securing the loan on the relevant quarterly REIT asset testing date or (B) the fair market value of the real property securing the loan determined as of the date the REIT committed to originate or acquire the loan.
−Removed: It is unclear how the safe harbor in Revenue Procedure 2014-51 is affected by the recent legislative changes regarding the treatment of loans secured by both real property and personal property where the fair market value of the personal property does not exceed 15% of the sum of the fair market values of the real property and the personal property securing the loan.
−Removed: There can be no assurance that later interpretations of or any clarifications to this Revenue Procedure will be consistent with how the Company currently is applying it to its REIT compliance analysis.
−Removed: The Company intends to invest in distressed mortgage loans in a manner consistent with qualifying as a REIT.
−Removed: Also as discussed above, the Company intends to invest in agency securities that are pass-through certificates.
−Removed: The Company expects that the agency securities will be treated either as interests in grantor trusts or as interests in REMICs for U.S.
−Removed: federal income tax purposes.
−Removed: In the case of agency securities treated as interests in grantor trusts, the Company would be treated as owning an undivided beneficial ownership interest in the mortgage loans held by the grantor trust.
−Removed: Such mortgage loans generally will qualify as real estate assets to the extent that they are secured by real property.
−Removed: The Company expects that substantially all of its agency securities treated as interests in a grantor trust will qualify as real estate assets.
−Removed: In the case of agency securities treated as interests in a REMIC, such interests generally will qualify as real estate assets.
−Removed: If less than 95% of the assets of a REMIC are real estate assets, however, then only a proportionate part of the Company’s interest in the REMIC will qualify as a real estate asset.
−Removed: To the extent that the Company holds mortgage participations or mortgage-backed securities that do not represent interests in a grantor trust or REMIC interests, such assets may not qualify as real estate assets depending upon the circumstances and the specific structure of the investment.
−Removed: Failure to Satisfy the Asset Tests
−Removed: The Company has monitored, and will continue to monitor, the status of its assets for purposes of the various asset tests.
−Removed: If the Company fails to satisfy the asset tests at the end of a calendar quarter, it will not lose its REIT qualification if:
−Removed: • the Company satisfied the asset tests at the end of the preceding calendar quarter;
−Removed: • the discrepancy between the value of the Company’s assets and the asset test requirements arose from changes in the market values of its assets and was not wholly or partly caused by the acquisition of one or more non-qualifying assets.
−Removed: If the Company does not satisfy the condition described in the second item, above, it still could avoid disqualification by eliminating any discrepancy within 30 days after the close of the calendar quarter in which it arose.
−Removed: If at the end of any calendar quarter the Company violates the 5% asset test or the 10% vote or value test described above, it will not lose its REIT qualification if:
−Removed: (i) the failure is de minimis (up to the lesser of 1% of its assets or $10 million);
−Removed: and (ii) it disposes of assets causing the failure or otherwise complies with the asset tests within six months after the last day of the quarter in which it identifies such failure.
−Removed: In the event of a failure of any of the asset tests (other than de minimis failures described in the preceding sentence), as long as the failure was due to reasonable cause and not to willful neglect, the Company will not lose its REIT status if it:
−Removed: (i) disposes of assets or otherwise complies with the asset tests within six months after the last day of the quarter in which it identifies the failure;
−Removed: (ii) it files a description of each
−Removed: asset causing the failure with the IRS;
−Removed: and (iii) pays a tax equal to the greater of $50,000 or 21% of the net income from the non-qualifying assets during the period in which the Company failed to satisfy the asset tests.
−Removed: Distribution Requirements
−Removed: Each taxable year, the Company must distribute dividends, other than capital gain dividends and deemed distributions of retained capital gain, to our stockholders in an aggregate amount at least equal to the sum of:
−Removed: • 90% of its “REIT taxable income,” computed without regard to the dividends paid deduction and its net capital gain or loss;
−Removed: • 90% of its after-tax net income, if any, from foreclosure property;
−Removed: • the sum of certain items of non-cash income.
−Removed: Generally, the Company must pay such distributions in the taxable year to which they relate, or in the following taxable year if:
−Removed: (i) the Company declares the distribution before it timely files its U.S.
−Removed: federal income tax return for the year and pays the distribution on or before the first regular dividend payment date after such declaration;
−Removed: or (ii) the Company declares the distribution in October, November or December of the taxable year, payable to stockholders of record on a specified day in any such month, and it actually pays the dividend before the end of January of the following year.
−Removed: The distributions under clause (i) are taxable to the stockholders in the year in which paid and the distributions in clause (ii) are treated as paid on December 31 of the prior taxable year.
−Removed: In both instances, these distributions relate to the Company’s prior taxable year for purposes of the 90% distribution requirement.
−Removed: Unless the Company qualifies as a “publicly offered REIT,” in order for its distributions to be counted as satisfying the annual distribution requirement for REITs and to provide it with the REIT-level tax deduction, such distributions must not have been “preferential dividends.” A dividend is not a preferential dividend if that distribution is:
−Removed: (i) pro rata among all outstanding shares within a particular class;
−Removed: and (ii) in accordance with the preferences among different classes of stock as set forth in the Company’s organizational documents.
−Removed: The Company expects to qualify as “publicly offered REIT,” and so long as it qualifies as a “publicly offered REIT,” the preferential dividend rule will not apply to it.
−Removed: The Company will pay U.S.
−Removed: federal income tax on taxable income, including net capital gain, that it does not distribute to stockholders.
−Removed: Furthermore, if the Company fails to distribute during a calendar year, or by the end of January following the calendar year in the case of distributions with declaration and record dates falling in the last three months of the calendar year, at least the sum of:
−Removed: • 85% of its REIT ordinary income for such year;
−Removed: • 95% of its REIT capital gain income for such year;
−Removed: • any undistributed taxable income from prior periods.
−Removed: The Company will incur a 4% nondeductible excise tax on the excess of such required distribution over the amounts it actually distributes.
−Removed: The Company may elect to retain and pay income tax on the net long-term capital gain it receives in a taxable year.
−Removed: If the Company so elects, it will be treated as having distributed any such retained amount for purposes of the 4% nondeductible excise tax described above.
−Removed: The Company intends to make timely distributions sufficient to satisfy the annual distribution requirements and to avoid corporate income tax and the 4% nondeductible excise tax.
−Removed: It is possible that, from time to time, the Company may experience timing differences between the actual receipt of income and or payment of deductible expenses and the inclusion of that income or deduction in arriving at its REIT taxable income.
−Removed: Other potential sources of non-cash taxable income include gain recognized on the deemed exchange of distressed debt that has been modified, real estate and securities that have been financed through securitization structures, such as the collateralized debt obligation structure, which require some or all of available cash flow to be used to service borrowings, loans or mortgage-backed securities that the Company holds that have been issued at a discount and require the accrual of taxable economic interest in advance of its receipt in cash and distressed loans on which the Company may be required to accrue taxable interest income even though the borrower is unable to make current servicing payments in cash.
−Removed: Furthermore, under Section 451 of the Code, subject to certain exceptions, the Company must accrue income for U.S.
−Removed: federal income tax purposes no later than when such income is taken into account as revenue in our financial statements, which could create additional differences between REIT taxable income and the receipt of cash attributable to such income.
−Removed: In addition, Section 162(m) of the Code places a per-employee limit of $1 million on the amount of compensation that a publicly held corporation may deduct in any one year with respect to its chief executive officer and certain other highly compensated executive officers.
−Removed: In the event that such timing differences occur, it might be necessary to arrange borrowings or other means of raising capital to meet the distribution requirements.
−Removed: Additionally, the Company may, if possible, pay taxable dividends of our stock or debt to meet the distribution requirements.
−Removed: On August 11, 2017, the IRS issued Revenue Procedure 2017-45, authorizing elective stock dividends to be made by public REITs.
−Removed: Pursuant to this revenue procedure, effective for distributions declared on or after August 11, 2017, the IRS will treat the distribution of stock pursuant to an elective stock dividend as a distribution of property under Section 301 of the Code (i.e., as a dividend to the extent of our earnings and profits), as long as at least 20% of the total dividend is available in cash and certain other requirements outlined in the revenue procedure are met.
−Removed: Under certain circumstances, the Company may be able to correct a failure to meet the distribution requirement for a year by paying “deficiency dividends” to our stockholders in a later year.
−Removed: The Company may include such deficiency dividends in its deduction for dividends paid for the earlier year.
−Removed: Although the Company may be able to avoid income tax on amounts distributed as deficiency dividends, it will be required to pay interest to the IRS based upon the amount of any deduction it takes for deficiency dividends.
−Removed: In addition, a REIT is required to distribute all accumulated earnings and profits attributable to non-REIT years by the close of its first taxable year in which it has non-REIT earnings and profits to distribute.
−Removed: Interest Deduction Limitation
−Removed: Commencing in taxable years beginning after December 31, 2017, Section 163(j) of the Code limits the deductibility of net interest expense paid or accrued on debt properly allocable to a trade or business to 30% of “adjusted taxable income,” subject to certain exceptions.
−Removed: Any deduction in excess of the limitation is carried forward and may be used in a subsequent year, subject to the 30% limitation.
−Removed: Adjusted taxable income is determined without regard to certain deductions, including those for net interest expense, net operating loss carryforwards and, for taxable years beginning before January 1, 2022, depreciation, amortization and depletion.
−Removed: Provided the taxpayer makes a timely election (which is irrevocable), the 30% limitation does not apply to a trade or business involving real property development, redevelopment, construction, reconstruction, rental, operation, acquisition, conversion, disposition, management, leasing or brokerage, within the meaning of Section 469(c)(7)(C) of the Code.
−Removed: If this election is made, depreciable real property (including certain improvements) held by the relevant trade or business must be depreciated under the alternative depreciation system under the Code, which is generally less favorable than the generally applicable system of depreciation under the Code.
−Removed: If we do not make the election or if the election is determined not to be available with respect to all or certain of our business activities, this interest deduction limitation could result in us having more REIT taxable income and thus increase the amount of distributions we must make to comply with the REIT requirements and avoid incurring corporate level tax.
−Removed: Similarly, the limitation could cause our TRSs to have greater taxable income and thus potentially greater corporate tax liability.
−Removed: Recordkeeping Requirements
−Removed: The Company is required to maintain certain records under the REIT rules.
−Removed: In addition, to avoid a monetary penalty, the Company must request on an annual basis information from our stockholders designed to disclose the actual ownership of its outstanding shares of beneficial interest.
−Removed: The Company intends to continue to comply with these requirements.
−Removed: Foreign Investments
−Removed: The Company and its subsidiaries have acquired, and expect to acquire in the future, investments in foreign countries that will require it to pay taxes to foreign countries.
−Removed: Taxes that the Company pays in foreign jurisdictions may not be passed through to, or used by, our stockholders as a foreign tax credit or otherwise.
−Removed: The Company could be subject to U.S.
−Removed: federal income tax rules intended to prevent or minimize the value of the deferral of the recognition by it of passive-type income of foreign entities in which it owns a direct or indirect interest.
−Removed: As a result, the Company could be required to recognize taxable income for U.S.
−Removed: federal income tax purposes prior to receiving cash distributions with respect to that income or, in certain circumstances, pay an interest charge on U.S.
−Removed: federal income tax that it is deemed to have deferred.
−Removed: The Company’s foreign investments might also generate foreign currency gains and losses.
−Removed: Certain foreign currency gains may be excluded from gross income for purposes of one or both of the gross income tests, as discussed above.
−Removed: Refer above to the section entitled “—Requirements for Qualification—Gross Income Tests.”
−Removed: Failure to Qualify
−Removed: If the Company fails to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, it could avoid disqualification if its failure is due to reasonable cause and not to willful neglect and the Company pays a penalty of $50,000 for each such failure.
−Removed: In addition, there are relief provisions for a failure of the gross income tests and asset tests, as described in the sections entitled “—Gross Income Tests—Failure to Satisfy the Gross Income Tests” and “—Asset Tests—Failure to Satisfy the Asset Tests.”
−Removed: If the Company fails to qualify as a REIT in any taxable year, and no relief provision applies, it would be subject to U.S.
−Removed: federal income tax and any applicable alternative minimum tax (only for its taxable year ended December 31, 2017) on its taxable income at regular corporate rates.
−Removed: In calculating its taxable income in a year in which it fails to qualify as a REIT, the Company would not be able to deduct amounts paid out to stockholders.
−Removed: In fact, the Company would not be required to distribute any amounts to stockholders in that year.
−Removed: In such event, to the extent of the Company’s current and accumulated earnings and profits, distributions to most stockholders taxed at individual rates would generally be taxable at capital gains tax rates.
−Removed: For taxable years beginning after December 31, 2017, and before January 1, 2026, generally U.S.
−Removed: stockholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations.
−Removed: Alternatively, such dividends paid to U.S.
−Removed: stockholders that are individuals, trusts and estates may be taxable at the preferential income tax rates (i.e., the 20% maximum U.S.
−Removed: federal rate) for qualified dividends.
−Removed: In addition, subject to the limitations of the Code, corporate distributees may be eligible for the dividends-received deduction.
−Removed: Unless the Company qualified for relief under specific statutory provisions, it also would be disqualified from taxation as a REIT for the four taxable years following the year during which it ceased to qualify as a REIT.
−Removed: The Company cannot predict whether in all circumstances it would qualify for such statutory relief.
−Removed: In addition, the rule against re-electing REIT status following a loss of such status could also apply to the Company if it were determined that CLNY or NRF failed to qualify as REITs and the Company were treated as a successor to CLNY or NRF, as applicable.
−Removed: Taxation of Taxable U.S.
−Removed: Stockholders of DigitalBridge
−Removed: The term “U.S.
−Removed: stockholder” means a beneficial owner of our stock that for U.S.
−Removed: federal income tax purposes is:
−Removed: • a citizen or resident of the United States;
−Removed: • a corporation (including an entity treated as a corporation for U.S.
−Removed: federal income tax purposes) created or organized in or under the laws of the United States, any of its states or the District of Columbia;
−Removed: • an estate whose income is subject to U.S.
−Removed: federal income taxation regardless of its source;
−Removed: • a trust if:
−Removed: court is able to exercise primary supervision over the administration of such trust and one or more U.S.
−Removed: persons have the authority to control all substantial decisions of the trust;
−Removed: or (ii) it has a valid election in place to be treated as a U.S.
−Removed: If a partnership (or other entity or arrangement treated as a partnership for U.S.
−Removed: federal income tax purposes) holds our stock, the U.S.
−Removed: federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership.
−Removed: If you are a partner in a partnership holding our stock, you should consult your tax advisor regarding the consequences of the purchase, ownership and disposition of our stock by the partnership.
−Removed: Taxation of U.S.
−Removed: Stockholders on Distributions on Our Stock
−Removed: As long as the Company qualifies as a REIT, a taxable U.S.
−Removed: stockholder must generally take into account as ordinary income distributions made out of the Company’s current or accumulated earnings and profits that the Company does not designate as capital gain dividends or retained long-term capital gain.
−Removed: However, for tax years prior to 2026, generally U.S.
−Removed: stockholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations.
−Removed: For purposes of determining whether a distribution is made out of its current or accumulated earnings and profits, the Company’s earnings and profits will be allocated first to its preferred stock dividends and then to its common stock dividends.
−Removed: Dividends paid to U.S.
−Removed: stockholders will not qualify for the dividends-received deduction generally available to corporations.
−Removed: In addition, dividends paid to a U.S.
−Removed: stockholder generally will not qualify for the 20% tax rate for qualified dividend income.
−Removed: The maximum tax rate for qualified dividend income is 20%.
−Removed: Qualified dividend income generally includes dividends paid to U.S.
−Removed: stockholders taxed at individual rates by domestic C corporations and certain qualified foreign corporations.
−Removed: Because the Company will not generally be subject to U.S.
−Removed: federal income tax on the portion of its REIT taxable income distributed to our stockholders (refer above to the section entitled “—Taxation of DigitalBridge”), its dividends generally will not be eligible for the 20% rate on qualified dividend income.
−Removed: As a result, the Company’s ordinary REIT dividends will be taxed at the higher tax rate applicable to ordinary income, which is currently a maximum rate of 37%.
−Removed: However, the 20% tax rate for qualified dividend income will apply to the Company’s ordinary REIT dividends to the extent attributable:
−Removed: (i) to income retained by it in a prior non-REIT taxable year in which it or a predecessor was subject to corporate income tax (less the amount of tax);
−Removed: (ii) to dividends received by it from non-REIT corporations, such as domestic TRSs;
−Removed: and (iii) to the extent attributable to income upon which it has paid corporate income tax ( e.g.
−Removed: , to the extent that the Company distributes less than 100% of its net taxable income).
−Removed: In general, to qualify for the reduced tax rate on qualified dividend income, a stockholder must hold our stock for more than 60 days during the 121-day period
−Removed: beginning on the date that is 60 days before the date on which our stock becomes ex-dividend.
−Removed: In addition, dividends paid to certain individuals, trusts and estates whose income exceeds certain thresholds are subject to a 3.8% Medicare tax.
−Removed: stockholder generally will take into account as long-term capital gain any distributions that the Company designates as capital gain dividends without regard to the period for which the U.S.
−Removed: stockholder has held our stock.
−Removed: The Company generally will designate its capital gain dividends as either 20% or 25% rate distributions.
−Removed: Refer below to the section entitled “—Capital Gains and Losses.” A corporate U.S.
−Removed: stockholder, however, may be required to treat up to 20% of certain capital gain dividends as ordinary income.
−Removed: The Company may elect to retain and pay income tax on the net long-term capital gain that it receives in a taxable year.
−Removed: In that case, to the extent that the Company designates such amount in a timely notice to such stockholder, a U.S.
−Removed: stockholder would be treated as receiving its proportionate share of the Company’s undistributed long-term capital gain and would receive a credit for its proportionate share of the tax the Company paid.
−Removed: stockholder would increase the basis in its stock by the amount of its proportionate share of the Company’s undistributed long-term capital gain, minus its share of the tax the Company paid.
−Removed: To the extent that the Company makes a distribution in excess of its current and accumulated earnings and profits, such distribution will not be taxable to a U.S.
−Removed: stockholder to the extent that it does not exceed the adjusted tax basis of the U.S.
−Removed: stockholder’s stock.
−Removed: Instead, such distribution will reduce the adjusted tax basis of such stock.
−Removed: To the extent that the Company makes a distribution in excess of both its current and accumulated earnings and profits and the U.S.
−Removed: stockholder’s adjusted tax basis in its stock, such stockholder will recognize long-term capital gain or short-term capital gain if the stock has been held for one year or less, assuming the stock is a capital asset in the hands of the U.S.
−Removed: In addition, if the Company declares a distribution in October, November or December of any year that is payable to a U.S.
−Removed: stockholder of record on a specified date in any such month, such distribution shall be treated as both paid by the Company and received by the U.S.
−Removed: stockholder on December 31 of such year, provided that the Company actually pays the distribution during January of the following calendar year.
−Removed: Stockholders may not include in their individual income tax returns any of the Company’s net operating losses or capital losses.
−Removed: Instead, the Company would carry over such losses for potential offset against the Company’s future income.
−Removed: Under Section 172 of the Code, the Company’s deduction for any net operating loss carryforwards arising from losses it sustains in taxable years beginning after December 31, 2017, is limited to 80% of its REIT taxable income (determined without regard to the deduction for dividends paid), and any unused portion of losses arising in taxable years ending after December 31, 2017, may not be carried back, but may be carried forward indefinitely.
−Removed: Taxable distributions from the Company and gain from the disposition of our stock will not be treated as passive activity income, and, therefore, stockholders generally will not be able to apply any “passive activity losses,” such as losses from certain types of limited partnerships in which the stockholder is a limited partner, against such income.
−Removed: In addition, taxable distributions from the Company and gain from the disposition of our stock generally may be treated as investment income for purposes of the investment interest limitations (although any capital gains so treated will not qualify for the lower 20% tax rate applicable to capital gains of U.S.
−Removed: stockholders taxed at individual rates).
−Removed: The Company will notify stockholders after the close of the Company’s taxable year as to the portions of its distributions attributable to that year that constitute ordinary income, return of capital and capital gain.
−Removed: Distributions to Holders of Depositary Shares.
−Removed: Owners of depositary shares will be treated for U.S.
−Removed: federal income tax purposes as if they were owners of the underlying preferred stock represented by such depositary shares.
−Removed: Accordingly, such owners will be entitled to take into account, for U.S.
−Removed: federal income tax purposes, income and deductions to which they would be entitled if they were direct holders of the underlying preferred shares.
−Removed: In addition, (1) no gain or loss will be recognized for U.S.
−Removed: federal income tax purposes upon the withdrawal of certificates evidencing the underlying preferred stock in exchange for depositary receipts, (2) the tax basis of each share of the underlying preferred stock to an exchanging owner of depositary shares will, upon such exchange, be the same as the aggregate tax basis of the depositary shares exchanged therefore, and (3) the hold period for the underlying preferred stock in the hands of an exchanging owner of depositary shares will include the period during which such person owned such depositary shares.
−Removed: Taxation of U.S.
−Removed: Stockholders on the Disposition of Our Stock
−Removed: In general, a U.S.
−Removed: stockholder who is not a dealer in securities must treat any gain or loss realized upon a taxable disposition of our stock as long-term capital gain or loss if the U.S.
−Removed: stockholder has held the stock for more than one year and otherwise as short-term capital gain or loss.
−Removed: However, a U.S.
−Removed: stockholder must treat any loss upon a sale or exchange of stock held by such stockholder for six months or less as a long-term capital loss to the extent of any actual or deemed distributions from the Company that such U.S.
−Removed: stockholder previously has characterized as long-term capital gain.
−Removed: All or a portion of any loss that a U.S.
−Removed: stockholder realizes upon a taxable disposition of the stock may be disallowed if the U.S.
−Removed: stockholder purchases other substantially identical 264 shares of our stock within 30 days before or after the disposition (in which case, the basis of the shares acquired would be adjusted to reflect the disallowed loss).
−Removed: Taxation of U.S.
−Removed: Stockholders on a Redemption of Preferred Stock and Depositary Shares
−Removed: A redemption of the Company’s preferred stock and depositary shares will be treated under Section 302 of the Code as a distribution that is taxable as dividend income (to the extent of its current or accumulated earnings and profits), unless the redemption satisfies certain tests set forth in Section 302(b) of the Code enabling the redemption to be treated as a sale of the preferred stock or depositary shares (in which case the redemption will be treated in the same manner as a sale described above in the section entitled “—Taxation of U.S.
−Removed: Stockholders on the Disposition of Our Stock”).
−Removed: The redemption will satisfy such tests if it:
−Removed: (i) is “substantially disproportionate” with respect to the U.S.
−Removed: stockholder’s interest in our stock;
−Removed: (ii) results in a “complete termination” of the U.S.
−Removed: stockholder’s interest in all classes of our stock;
−Removed: or (iii) is “not essentially equivalent to a dividend” with respect to the stockholder, all within the meaning of Section 302(b) of the Code.
−Removed: In determining whether any of these tests have been met, stock considered to be owned by the holder by reason of certain constructive ownership rules set forth in the Code, as well as stock actually owned, generally must be taken into account.
−Removed: Because the determination as to whether any of the three alternative tests of Section 302(b) of the Code described above will be satisfied with respect to any particular U.S.
−Removed: stockholder of the preferred stock or depositary shares depends upon the facts and circumstances at the time that the determination must be made, prospective investors are urged to consult their tax advisors to determine such tax treatment.
−Removed: If a redemption of the Company’s preferred stock or depositary shares does not meet any of the three tests described above, the redemption proceeds will be treated as a distribution, as described above in the section entitled “—Taxation of U.S.
−Removed: Stockholders on Distributions on Our Stock.” In that case, a U.S.
−Removed: stockholder’s adjusted tax basis in the redeemed preferred stock or depositary shares will be transferred to such U.S.
−Removed: stockholder’s remaining stock holdings in the Company.
−Removed: stockholder does not retain any of the Company’s shares, such basis could be transferred to a related person that holds our stock or it may be lost.
−Removed: Under proposed Treasury Regulations, if any portion of the amount received by a U.S.
−Removed: stockholder on a redemption of any class of the Company’s preferred stock or depositary shares is treated as a distribution with respect to our stock but not as a taxable dividend, then such portion will be allocated to all stock of the redeemed class held by the redeemed stockholder just before the redemption on a pro-rata, share-by-share, basis.
−Removed: The amount applied to each share will first reduce the redeemed U.S.
−Removed: stockholder’s basis in that share and any excess after the basis is reduced to zero will result in taxable gain.
−Removed: If the redeemed stockholder has different bases in its shares, then the amount allocated could reduce some of the basis in certain shares while reducing all the basis and giving rise to taxable gain in others.
−Removed: Thus, the redeemed U.S.
−Removed: stockholder could have gain even if such U.S.
−Removed: stockholder’s basis in all its shares of the redeemed class exceeded such portion.
−Removed: The proposed Treasury Regulations permit the transfer of basis in the redeemed preferred or depositary shares to the redeemed U.S.
−Removed: stockholder’s remaining, unredeemed preferred or depositary shares of the same class, if any, but not to any other class of shares held, directly or indirectly, by the redeemed U.S.
−Removed: Instead, any unrecovered basis in the redeemed preferred or depositary shares would be treated as a deferred loss to be recognized when certain conditions are satisfied.
−Removed: The proposed Treasury Regulations would be effective for transactions that occur after the date the regulations are published as final Treasury Regulations.
−Removed: There can, however, be no assurance as to whether, when and in what particular form such proposed Treasury Regulations will ultimately be finalized.
−Removed: Capital Gains and Losses
−Removed: A taxpayer generally must hold a capital asset for more than one year for gain or loss derived from its sale or exchange to be treated as long-term capital gain or loss.
−Removed: The highest marginal individual income tax rate is currently 37%.
−Removed: However, the maximum tax rate on long-term capital gain applicable to U.S.
−Removed: stockholders taxed at individual rates is 20%.
−Removed: The maximum tax rate on long-term capital gain from the sale or exchange of “Section 1250 property,” which we refer to as depreciable real property, is 25% computed on the lesser of the total amount of the gain or the accumulated Section 1250 depreciation.
−Removed: In addition, capital gains recognized by certain individuals, trusts and estates whose income exceeds certain thresholds are subject to a 3.8% Medicare tax.
−Removed: With respect to distributions that the Company designates as capital gain dividends and any retained capital gain that it is deemed to distribute, the Company generally may designate whether such a distribution is taxable to its U.S.
−Removed: stockholders taxed at individual rates at a 20% or 25% rate.
−Removed: Thus, the tax rate differential between capital gain and ordinary income for those taxpayers may be significant.
−Removed: In addition, the characterization of income as capital gain or ordinary income may affect the deductibility of capital losses.
−Removed: A non-corporate taxpayer may deduct capital losses not offset by capital gains against its ordinary income only up to a maximum annual amount of $3,000.
−Removed: A non-corporate taxpayer may carry forward unused capital losses indefinitely.
−Removed: A corporate taxpayer must pay tax on its net capital gain at ordinary corporate rates.
−Removed: A corporate taxpayer may deduct capital losses only to the extent of capital gains, with unused losses being carried back three years and forward five years.
−Removed: Expansion of Medicare Tax
−Removed: The Health Care and Reconciliation Act of 2010 requires that, in certain circumstances, certain U.S.
−Removed: holders that are individuals, estates, and trusts pay a 3.8% tax on “net investment income,” which includes, among other things, dividends on and gains from the sale or other disposition of REIT shares.
−Removed: The temporary 20% deduction allowed by Section 199A of the Code with respect to ordinary REIT dividends received by non-corporate taxpayers is allowed only for purposes of Chapter 1 of the Code and thus is apparently not allowed as a deduction allocable to such dividends for purposes of determining the amount of net investment income subject to the 3.8% Medicare tax, which is imposed under Chapter 2A of the Code.
−Removed: Prospective investors should consult their own tax advisors regarding this legislation.
−Removed: Taxation of Tax-Exempt Stockholders
−Removed: Tax-exempt entities, including qualified employee pension and profit-sharing trusts and individual retirement accounts and annuities, generally are exempt from U.S.
−Removed: federal income taxation.
−Removed: However, they are subject to taxation on their unrelated business taxable income, which we refer to as UBTI.
−Removed: While many investments in real estate generate UBTI, the IRS has issued a published ruling that dividend distributions from a REIT to an exempt employee pension trust do not constitute UBTI, provided that the exempt employee pension trust does not otherwise use the shares of the REIT in an unrelated trade or business of the pension trust.
−Removed: Based on that ruling, amounts that the Company distributes to tax-exempt stockholders generally should not constitute UBTI.
−Removed: However, if a tax-exempt stockholder were to finance its investment in our stock with debt, a portion of the income that it receives from the Company would constitute UBTI pursuant to the “debt-financed property” rules.
−Removed: Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans that are exempt from taxation under special provisions of the U.S.
−Removed: federal income tax laws are subject to different UBTI rules, which generally will require them to characterize distributions that they receive from the Company as UBTI.
−Removed: Finally, in certain circumstances, a qualified employee pension or profit-sharing trust that owns more than 10% of our stock is required to treat a percentage of the dividends that it receives from the Company as UBTI if the Company is a “pension-held REIT.” Such percentage is equal to the gross income that the Company derives from an unrelated trade or business, determined as if the Company were a pension trust, divided by the Company’s total gross income for the year in which the Company pays the dividends.
−Removed: That rule applies to a pension trust holding more than 10% of our stock only if:
−Removed: • the percentage of the Company’s dividends that the tax-exempt trust would be required to treat as UBTI is at least 5%;
−Removed: • the Company qualifies as a REIT by reason of the modification of the rule requiring that no more than 50% of our stock be owned by five or fewer individuals that allows the beneficiaries of the pension trust to be treated as holding our stock in proportion to its actuarial interests in the pension trust (refer to the section entitled “—Requirements for Qualification”);
−Removed: (i) one pension trust owns more than 25% of the value of our stock;
−Removed: or (ii) a group of pension trusts individually holding more than 10% of the value of our stock collectively owns more than 50% of the value of our stock.
−Removed: Taxation of Non-U.S.
−Removed: The term “non-U.S.
−Removed: stockholder” means a beneficial owner of our stock that is not a U.S.
−Removed: stockholder or a partnership (or other entity or arrangement treated as a partnership for U.S.
−Removed: federal income tax purposes).
−Removed: The rules governing U.S.
−Removed: federal income taxation of non-U.S.
−Removed: stockholders are complex.
−Removed: This section is only a summary of such rules.
−Removed: stockholders are urged to consult their tax advisors to determine the impact of U.S.
−Removed: federal, state, local and foreign income tax laws on the ownership of our stock, including any reporting requirements.
−Removed: stockholder that receives a distribution that is not attributable to gain from the Company’s sale or exchange of a “United States real property interest,” which we refer to as USRPI, and that the Company does not designate as a capital gain dividend or retained capital gain, will recognize ordinary income to the extent that the Company pays such distribution out of its current or accumulated earnings and profits.
−Removed: A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply to such distribution unless an applicable tax treaty reduces or eliminates the tax.
−Removed: If a distribution is treated as effectively connected with the non-U.S.
−Removed: stockholder’s conduct of a U.S.
−Removed: trade or business, the non-U.S.
−Removed: stockholder generally will be subject to U.S.
−Removed: federal income tax on the distribution at graduated rates, in the same manner as U.S.
−Removed: stockholders are taxed with respect to such distribution, and a non-U.S.
−Removed: stockholder that is a corporation also may be subject to the 30% branch profits tax with respect to the distribution.
−Removed: The Company plans to withhold U.S.
−Removed: income tax at the rate of 30% on the gross amount of any such distribution paid to a non-U.S.
−Removed: stockholder unless either:
−Removed: • a lower treaty rate applies and the non-U.S.
−Removed: stockholder provides an IRS Form W-8BEN or W-8BEN-E to the Company evidencing eligibility for that reduced rate;
−Removed: • the non-U.S.
−Removed: stockholder files an IRS Form W-8ECI with the Company claiming that the distribution is effectively connected income.
−Removed: stockholder will not incur tax on a distribution in excess of the Company’s current and accumulated earnings and profits if the excess portion of such distribution does not exceed the stockholder’s adjusted basis of its stock.
−Removed: Instead, the excess portion of such distribution will reduce the adjusted basis of such stock.
−Removed: stockholder will be subject to tax on a distribution that exceeds both the Company’s current and accumulated earnings and profits and the stockholder’s adjusted basis of its stock, if the non-U.S.
−Removed: stockholder otherwise would be subject to tax on gain from the sale or disposition of its stock, as described below.
−Removed: Because the Company generally cannot determine at the time it makes a distribution whether the distribution will exceed its current and accumulated earnings and profits, the Company normally will withhold tax on the entire amount of any distribution at the same rate as it would withhold on a dividend.
−Removed: However, a non-U.S.
−Removed: stockholder may claim a refund of amounts that the Company withholds if the Company later determines that a distribution in fact exceeded the Company’s current and accumulated earnings and profits.
−Removed: If the Company is treated as a “United States real property holding corporation,” as described below, it will be required to withhold 15% of any distribution that exceeds its current and accumulated earnings and profits.
−Removed: Consequently, although the Company intends to withhold at a rate of 30% on the entire amount of any distribution, to the extent that it does not do so, the Company may withhold at a rate of 15% on any portion of a distribution not subject to withholding at a rate of 30%.
−Removed: For any year in which the Company qualifies as a REIT, a non-U.S.
−Removed: stockholder will incur tax on distributions that are attributable to gain from the Company’s sale or exchange of a USRPI under the Foreign Investment in Real Property Tax Act of 1980, which we refer to as FIRPTA.
−Removed: A USRPI includes certain interests in real property and stock in “United States real property holding corporations,” which are corporations at least 50% of whose assets consist of interests in real property.
−Removed: Under FIRPTA, a non-U.S.
−Removed: stockholder is taxed on distributions attributable to gain from sales of USRPIs as if such gain were effectively connected with a U.S.
−Removed: business of the non-U.S.
−Removed: stockholder thus would be taxed on such a distribution at the normal capital gains rates applicable to U.S.
−Removed: stockholders, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of a nonresident alien individual.
−Removed: corporate stockholder not entitled to treaty relief or an exemption also may be subject to the 30% branch profits tax on such a distribution.
−Removed: The Company must withhold 21% of any distribution that it could designate as a capital gain dividend.
−Removed: stockholder may receive a credit against its tax liability for the amount the Company withholds.
−Removed: Capital gain distributions to a non-U.S.
−Removed: stockholder that are attributable to the Company’s sale of real property will be treated as ordinary dividends rather than as gain from the sale of a USRPI, as long as:
−Removed: (i)(A) such class of our stock is “regularly traded” on an established securities market in the United States;
−Removed: and (B) the non-U.S.
−Removed: stockholder did not own more than 10% of the applicable class of our stock at any time during the one-year period prior to the distribution;
−Removed: or (ii) the non-U.S.
−Removed: stockholder was treated as a “qualified shareholder” as discussed below.
−Removed: As a result, non-U.S.
−Removed: stockholders owning 10% or less of the applicable class of our stock that is “regularly traded” generally will be subject to withholding tax on such capital gain distributions in the same manner as they are subject to withholding tax on ordinary dividends.
−Removed: If a class of our stock is not regularly traded on an established securities market in the United States or the non-U.S.
−Removed: stockholder owned more than 10% of our stock at any time during the one-year period prior to the distribution, capital gain distributions that are attributable to the Company’s sale of real property would be subject to tax under FIRPTA, as described in the preceding paragraph.
−Removed: Moreover, if a non-U.S.
−Removed: stockholder disposes of our stock during the 30-day period preceding a dividend payment, and such non-U.S.
−Removed: stockholder (or a person related to such non-U.S.
−Removed: stockholder) acquires or enters into a contract or option to acquire our stock within 61 days of the first day of the 30-day period described above, and any portion of such dividend payment would, but for the disposition, be treated as a USRPI capital gain to such non-U.S.
−Removed: stockholder, then such non-U.S.
−Removed: stockholder shall be treated as having USRPI capital gain in an amount that, but for the disposition, would have been treated as USRPI capital gain.
−Removed: Although the law is not clear on the matter, it appears that amounts the Company designates as retained capital gains in respect of the stock held by U.S.
−Removed: stockholders generally should be treated with respect to non-U.S.
−Removed: stockholders in the same manner as actual distributions by the Company of capital gain dividends.
−Removed: Under this approach, a non-U.S.
−Removed: stockholder would be able to offset as a credit against its U.S.
−Removed: federal income tax liability its proportionate share of the tax paid by the Company on such retained capital gains, and to receive from the IRS a refund to the extent the non-U.S.
−Removed: stockholder’s proportionate share of such tax paid by the Company exceeds its actual U.S.
−Removed: federal income tax liability, provided that the non-U.S.
−Removed: stockholder furnishes required information to the IRS on a timely basis, which may require the filing of a tax return with the IRS.
−Removed: stockholder generally will not incur tax under FIRPTA with respect to gain realized upon a disposition of our stock as long as the Company:
−Removed: (i) is not a “United States real property holding corporation” during a specified testing period;
−Removed: or (ii) is a domestically controlled qualified investment entity.
−Removed: A domestically controlled qualified investment entity includes a REIT, less than 50% of the value of which is held directly or indirectly by foreign persons at all times during a specified testing period.
−Removed: The Company believes that it will be a domestically controlled qualified investment entity, but because our stock will be publicly traded, it cannot assure you that it in fact will be a domestically controlled qualified investment entity.
−Removed: However, even if the Company were a “United States real property holding corporation” and it were not a domestically controlled qualified investment entity, a non-U.S.
−Removed: stockholder that owned, actually or constructively, 10% or less of the applicable class of our stock at all times during a specified testing period would not incur tax under FIRPTA if that class of our stock is “regularly traded” on an established securities market.
−Removed: Because the Company expects that its common and preferred stock will be regularly traded on an established securities market, a non-U.S.
−Removed: stockholder will not incur tax under FIRPTA with respect to any such gain unless it owns, actually or constructively, more than 10% of the applicable class of our stock.
−Removed: If the gain on the sale of our stock were taxed under FIRPTA, a non-U.S.
−Removed: stockholder would be taxed in the same manner as U.S.
−Removed: stockholders with respect to such gain, subject to applicable alternative minimum tax or a special alternative minimum tax in the case of nonresident alien individuals.
−Removed: Furthermore, a non-U.S.
−Removed: stockholder will incur tax on gain not subject to FIRPTA if:
−Removed: (i) the gain is effectively connected with the non-U.S.
−Removed: stockholder’s U.S.
−Removed: trade or business, in which case the non-U.S.
−Removed: stockholder will be subject to the same treatment as U.S.
−Removed: stockholders with respect to such gain;
−Removed: or (ii) the non-U.S.
−Removed: stockholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, in which case the non-U.S.
−Removed: stockholder will incur a 30% tax on his capital gains.
−Removed: Qualified Shareholders
−Removed: Subject to the exception discussed below, any distribution to a “qualified shareholder,” as defined below, who holds our stock directly or indirectly (through one or more partnerships) will not be subject to U.S.
−Removed: tax as income effectively connected with a U.S.
−Removed: trade or business and thus will not be subject to special withholding rules under FIRPTA.
−Removed: While a “qualified shareholder” will not be subject to FIRPTA withholding on REIT distributions, certain investors of a “qualified shareholder” ( i.e ., non-U.S.
−Removed: persons who hold interests in the “qualified shareholder” (other than interests solely as a creditor), and hold more than 10% of our stock (whether or not by reason of the investor’s ownership in the “qualified shareholder”)) may be subject to FIRPTA withholding.
−Removed: In addition, a sale of our stock by a “qualified shareholder” who holds such stock directly or indirectly (through one or more partnerships) will not be subject to U.S.
−Removed: federal income taxation under FIRPTA.
−Removed: As with distributions, certain investors of a “qualified shareholder” ( i.e ., non-U.S.
−Removed: persons who hold interests in the “qualified shareholder” (other than interests solely as a creditor), and hold more than 10% of our stock (whether or not by reason of the investor’s ownership in the “qualified shareholder”)) may be subject to FIRPTA withholding on a sale of our stock.
−Removed: A “qualified shareholder” is a foreign person that:
−Removed: (i) either is eligible for the benefits of a comprehensive income tax treaty which includes an exchange of information program and whose principal class of interests is listed and regularly traded on one or more recognized stock exchanges (as defined in such comprehensive income tax treaty), or is a foreign partnership that is created or organized under foreign law as a limited partnership in a jurisdiction that has an agreement for the exchange of information with respect to taxes with the United States and has a class of limited partnership units representing greater than 50% of the value of all the partnership units that are regularly traded on the NYSE or NASDAQ markets;
−Removed: (ii) is a qualified collective investment vehicle, as defined below;
−Removed: and (iii) maintains records on the identity of each person who, at any time during the foreign person’s taxable year, is the direct owner of 5% or more of the class of interests or units, as applicable, described in (i), above.
−Removed: A qualified collective investment vehicle is a foreign person that:
−Removed: (i) would be eligible for a reduced rate of withholding under the comprehensive income tax treaty described above, even if such entity holds more than 10% of the stock of such REIT;
−Removed: (ii) is publicly traded, is treated as a partnership under the Code, is a withholding foreign partnership, and would be treated as a “United States real property holding corporation” if it were a domestic corporation;
−Removed: or (iii) is designated as such by the Secretary of the Treasury and is either (A) fiscally transparent within the meaning of Section 894 of the Code or (B) required to include dividends in its gross income, but is entitled to a deduction for distributions to its investors.
−Removed: Qualified Foreign Pension Funds
−Removed: Any distribution to a “qualified foreign pension fund” (or an entity all of the interests of which are held by a “qualified foreign pension fund”) who holds our stock directly or indirectly (through one or more partnerships) will not be subject to U.S.
−Removed: tax as income effectively connected with a U.S.
−Removed: trade or business and thus will not be subject to special withholding rules under FIRPTA.
−Removed: In addition, a sale of our stock by a “qualified foreign pension fund” that holds such stock directly or indirectly (through one or more partnerships) will not be subject to U.S.
−Removed: federal income taxation under FIRPTA.
−Removed: A qualified foreign pension fund is any trust, corporation or other organization or arrangement:
−Removed: (i) which is created or organized under the law of a country other than the United States;
−Removed: (ii) which is established to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration for services rendered;
−Removed: (iii) which does not have a single participant or beneficiary with a right to more than 5% of its assets or income;
−Removed: (iv) which is subject to government regulation and provides annual information reporting about its beneficiaries to the relevant tax authorities in the country in which it is established or operates;
−Removed: and (v) with respect to which, under the laws of the country in which it is established or operates, (A) contributions to such organization or arrangement that would otherwise be subject to tax under such laws are deductible or excluded from the gross income of such entity or taxed at a reduced rate or (B) taxation of any investment income of such organization or arrangement is deferred or such income is taxed at a reduced rate.
−Removed: FATCA Withholding
−Removed: Under the Foreign Account Tax Compliance Act, which we refer to as FATCA, a U.S.
−Removed: withholding tax at a 30% rate will be imposed on dividends paid on our stock received by certain non-U.S.
−Removed: stockholders if certain disclosure requirements related to U.S.
−Removed: accounts or ownership are not satisfied.
−Removed: In addition, if those disclosure requirements are not satisfied, a U.S.
−Removed: withholding tax at a 30% rate will be imposed on proceeds from the sale of our stock received after December 31, 2018 by certain non-U.S.
−Removed: stockholders (subject to the proposed Treasury Regulations discussed below).
−Removed: If payment of withholding taxes is required, non-U.S.
−Removed: stockholders that are otherwise eligible for an exemption from, or reduction of, U.S.
−Removed: withholding taxes with respect to such dividends and proceeds will be required to seek a refund from the IRS to obtain the benefit of such exemption or reduction.
−Removed: The Company will not pay any additional amounts in respect of any amounts withheld.
−Removed: While withholding under FATCA would have applied to payments of gross proceeds from the sale or disposition of our stock received after December 31, 2018, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely.
−Removed: Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.
−Removed: Information Reporting Requirements and Backup Withholding;
−Removed: Shares Held Offshore
−Removed: The Company will report to its stockholders and to the IRS the amount of distributions it pays during each calendar year, and the amount of tax it withholds, if any.
−Removed: Under the backup withholding rules, a stockholder may be subject to backup withholding at a rate of 28% with respect to distributions unless the holder:
−Removed: • is a corporation or qualifies for certain other exempt categories and, when required, demonstrates this fact;
−Removed: • provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules.
−Removed: A stockholder who does not provide the Company with its correct taxpayer identification number also may be subject to penalties imposed by the IRS.
−Removed: Any amount paid as backup withholding will be creditable against the stockholder’s income tax liability.
−Removed: In addition, the Company may be required to withhold a portion of capital gain distributions to any U.S.
−Removed: stockholders who fail to certify their non-foreign status to the Company.
−Removed: Backup withholding will generally not apply to payments of dividends made by the Company or its paying agents, in their capacities as such, to a non-U.S.
−Removed: stockholder, provided that the non-U.S.
−Removed: stockholder furnishes to the Company or its paying agent the required certification as to its non-U.S.
−Removed: status, such as providing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or certain other requirements are met.
−Removed: Notwithstanding the foregoing, backup withholding may apply if either the Company or its paying agent has actual knowledge, or reason to know, that the holder is a U.S.
−Removed: person that is not an exempt recipient.
−Removed: Payments of the net proceeds from a disposition or a redemption effected outside the United States by a non-U.S.
−Removed: stockholder made by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding.
−Removed: However, information reporting (but not backup withholding) generally will apply to such a payment if the broker has certain connections with the U.S.
−Removed: unless the broker has documentary evidence in its records that the beneficial owner is a non-U.S.
−Removed: stockholder and specified conditions are met or an exemption is otherwise established.
−Removed: Payment of the net proceeds from a disposition by a non-U.S.
−Removed: stockholder of our stock made by or through the U.S.
−Removed: office of a broker is generally subject to information reporting and backup withholding unless the non-U.S.
−Removed: stockholder certifies under penalties of perjury that it is not a U.S.
−Removed: person and satisfies certain other requirements or otherwise establishes an exemption from information reporting and backup withholding.
−Removed: Backup withholding is not an additional tax.
−Removed: Any amounts withheld under the backup withholding rules may be refunded or credited against the stockholder’s U.S.
−Removed: federal income tax liability if certain required information is furnished to the IRS.
−Removed: Stockholders are urged to consult their own tax advisors regarding application of backup withholding to them and the availability of, and procedure for obtaining an exemption from, backup withholding.
−Removed: Under FATCA, a U.S.
−Removed: withholding tax at a 30% rate will be imposed on dividends paid on our stock received by U.S.
−Removed: stockholders who own their stock through foreign accounts or foreign intermediaries if certain disclosure requirements related to U.S.
−Removed: accounts or ownership are not satisfied.
−Removed: In addition, if those disclosure requirements are not satisfied, a U.S.
−Removed: withholding tax at a 30% rate will be imposed on proceeds from the sale of our stock received after December 31, 2018 by U.S.
−Removed: stockholders who own their shares through foreign accounts or foreign intermediaries.
−Removed: The Company will not pay any additional amounts in respect of any amounts withheld.
−Removed: Other Tax Consequences
−Removed: Tax Aspects of DigitalBridge's Investments in the Operating Partnership and the Subsidiary Partnerships
−Removed: The following discussion summarizes certain U.S.
−Removed: federal income tax considerations applicable to the Company’s direct or indirect investments in the Company’s Operating Partnership and any subsidiary partnerships or limited liability companies that the Company forms or acquires interests in and that are treated as partnerships for U.S.
−Removed: federal income tax purposes, which we refer to, individually, as a Partnership and, collectively, as the Partnerships.
−Removed: The discussion does not cover state or local tax laws or any U.S.
−Removed: federal tax laws other than income tax laws.
−Removed: The Company will include in its income its proportionate share of Partnership items of income, gain, loss, deduction or credit for purposes of the REIT income tests, and will include its proportionate share of assets held by the Partnerships based on its capital interest in such partnerships (other than for purposes of the 10% value test, for which the determination of our interest in partnership assets will be based on our proportionate interest in any securities issued by the partnership, other than certain securities specifically excluded under the Code).
−Removed: The Company’s capital interest in a Partnership is calculated based on either the Company’s percentage ownership of the capital of the Partnership or based on the allocations provided in the applicable partnership or limited liability company operating agreement, using the more conservative calculation.
−Removed: Consequently, to the extent that the Company holds an equity interest in a Partnership, the Partnership’s assets and operations may affect its ability to qualify as a REIT, even though the Company may have no control, or have only limited influence, over the Partnership.
−Removed: Classification as Partnerships.
−Removed: The Company is entitled to include in its income its distributive share of each Partnership’s income and to deduct its distributive share of each Partnership’s losses only if such Partnership is classified for U.S.
−Removed: federal income tax purposes as a partnership (or an entity that is disregarded for U.S.
−Removed: federal income tax purposes if the entity has only one owner or member) rather than as a corporation or an association taxable as a corporation.
−Removed: An unincorporated domestic entity with at least two owners or members will be classified as a partnership, rather than as a corporation, for U.S.
−Removed: federal income tax purposes if it:
−Removed: • is treated as a partnership under the Treasury Regulations relating to entity classification or the check-the-box regulations, as described below;
−Removed: • is not a “publicly traded” partnership, as defined below.
−Removed: Under the check-the-box regulations, an unincorporated domestic entity with at least two owners or members may elect to be classified either as an association taxable as a corporation or as a partnership.
−Removed: If such an entity fails to make an election, it generally will be treated as a partnership (or as an entity that is disregarded for U.S.
−Removed: federal income tax purposes if the entity has only one owner or member) for U.S.
−Removed: federal income tax purposes.
−Removed: Each Partnership intends to be classified as a partnership for U.S.
−Removed: federal income tax purposes and no Partnership will elect to be treated as an association taxable as a corporation under the check-the-box regulations.
−Removed: A publicly traded partnership is a partnership whose interests are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof.
−Removed: A publicly traded partnership will not, however, be treated as a corporation for any taxable year if, for each taxable year beginning after December 31, 1987 in which it was classified as a publicly traded partnership, 90% or more of the partnership’s gross income for such year consists of certain passive-type income, including real property rents, gains from the sale or other disposition of real property, interest and dividends, or the 90% passive income exception.
−Removed: Treasury Regulations provide additional limited safe harbors from the definition of a publicly traded partnership.
−Removed: Pursuant to the private placement exclusion safe harbor, interests in a partnership will not be treated as readily tradable on a secondary market or the substantial equivalent thereof if:
−Removed: (i) all interests in the partnership were issued in a transaction or transactions that were not required to be registered under the Securities Act;
−Removed: and (ii) the partnership does not have more than 100 partners at any time during the partnership’s taxable year.
−Removed: In determining the number of partners in a partnership, a person owning an interest in a partnership, grantor trust or S corporation that owns an interest in the partnership is treated as a partner in such partnership only if:
−Removed: (i) substantially all of the value of the owner’s interest in the entity is attributable to the entity’s direct or indirect interest in the partnership;
−Removed: and (ii) a principal purpose of the use of the entity is to permit the partnership to satisfy the 100-partner limitation.
−Removed: Each Partnership is expected to qualify for treatment as a partnership for U.S.
−Removed: federal income tax purposes pursuant to the 90% passive income exception or the private placement safe harbor.
−Removed: The Company has not
−Removed: requested, and does not intend to request, a ruling from the IRS that the Partnerships will be classified as partnerships for U.S.
−Removed: federal income tax purposes.
−Removed: If, for any reason, a Partnership in which the Company owned more than 10% of the equity were taxable as a corporation, rather than as a partnership, for U.S.
−Removed: federal income tax purposes, the Company likely would not be able to qualify as a REIT unless it qualified for certain relief provisions.
−Removed: Refer to the sections entitled “—Requirements for Qualification—Gross Income Tests” and “—Requirements for Qualification—Asset Tests.” In addition, any change in a Partnership’s status for tax purposes might be treated as a taxable event, in which case the Company might incur tax liability without any related cash distribution.
−Removed: Refer to the section entitled “—Requirements for Qualification—Distribution Requirements.” Further, items of income and deduction of such Partnership would not pass through to its partners, and its partners would be treated as stockholders for tax purposes.
−Removed: Consequently, such Partnership would be required to pay income tax at corporate rates on its net income and distributions to its partners would constitute dividends that would not be deductible in computing such Partnership’s taxable income.
−Removed: Income Taxation of the Partnerships and their Partners
−Removed: Partners, Not the Partnerships, Subject to Tax.
−Removed: A partnership generally is not a taxable entity for U.S.
−Removed: federal income tax purposes.
−Removed: Rather, the Company is required to take into account its allocable share of each Partnership’s income, gains, losses, deductions and credits for any taxable year of such Partnership ending within or with the Company’s taxable year, without regard to whether the Company has received or will receive any distribution from such Partnership.
−Removed: For taxable years beginning after December 31, 2017, however, the tax liability for adjustments to a Partnership’s tax returns made as a result of an audit by the IRS will be imposed on the Partnership itself in certain circumstances absent an election to the contrary.
−Removed: Partnership Allocations.
−Removed: Although a partnership agreement generally will determine the allocation of income and losses among partners, such allocations will be disregarded for tax purposes if they do not comply with the provisions of the U.S.
−Removed: federal income tax laws governing partnership allocations.
−Removed: If an allocation is not recognized for U.S.
−Removed: federal income tax purposes, the item subject to the allocation will be reallocated in accordance with the partners’ interests in the partnership, which will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item.
−Removed: Each Partnership’s allocations of taxable income, gain and loss are intended to comply with the requirements of the U.S.
−Removed: federal income tax laws governing partnership allocations.
−Removed: Tax Allocations With Respect to Contributed Properties.
−Removed: Income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in a tax-deferred transaction or contributed property in exchange for an interest in the partnership must be allocated in a manner such that the contributing partner is charged with, or benefits from, respectively, the unrealized gain or unrealized loss associated with the property at the time of the contribution.
−Removed: The amount of such unrealized gain or unrealized loss, or built-in gain or built-in loss, respectively, is generally equal to the difference between the fair market value of the contributed property at the time of contribution and the adjusted tax basis of such property at the time of contribution, or a book-tax difference.
−Removed: Such allocations are solely for U.S.
−Removed: federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners.
−Removed: Treasury Department has issued regulations requiring partnerships to use a “reasonable method” for allocating items with respect to which there is a book-tax difference and outlining several reasonable allocation methods.
−Removed: Basis in Partnership Interest.
−Removed: The Company’s adjusted tax basis in any Partnership generally is equal to:
−Removed: ▪ the amount of cash and the basis of any other property contributed by the Company to the Partnership;
−Removed: ▪ increased by the Company’s allocable share of the Partnership’s income and its allocable share of indebtedness of the Partnership;
−Removed: ▪ reduced, but not below zero, by the Company’s allocable share of the Partnership’s loss and the amount of cash distributed to the Company and by constructive distributions resulting from a reduction in the Company’s share of indebtedness of the Partnership.
−Removed: If the allocation of the Company’s distributive share of the Partnership’s loss would reduce the adjusted tax basis of the Company’s partnership interest below zero, the recognition of such loss will be deferred until such time as the recognition of such loss would not reduce the Company’s adjusted tax basis below zero.
−Removed: To the extent that the Partnership’s distributions or any decrease in the Company’s share of the indebtedness of the Partnership, which is considered a constructive cash distribution to the partners, would reduce the Company’s adjusted tax basis below zero, such distributions or decreases will constitute taxable income to the Company.
−Removed: Such distributions and constructive distributions normally will be characterized as long-term capital gain.
−Removed: Depreciation Deductions Available to Partnerships.
−Removed: The initial tax basis of property is the amount of cash and the basis of property given as consideration for the property.
−Removed: The Partnership’s initial basis in contributed properties acquired in exchange for units of the Partnership should be the same as the transferor’s basis in such properties on the date of acquisition.
−Removed: Although the law is not entirely clear, the Partnership generally will depreciate such property for U.S.
−Removed: federal income tax purposes over the same remaining useful lives and under the same methods used by the transferors.
−Removed: The Partnership’s tax depreciation deductions will be allocated among the partners in accordance with their respective interests in the Partnership, except to the extent that the Partnership is required under the U.S.
−Removed: federal income tax laws governing partnership allocations to use another method for allocating tax depreciation deductions attributable to contributed or revalued properties, which could result in the Company receiving a disproportionate share of such deductions.
−Removed: Sale of a Partnership’s Property
−Removed: Generally, any gain realized by a Partnership on the sale of property held by the Partnership for more than one year will be long-term capital gain, except for any portion of such gain that is treated as depreciation or cost recovery recapture.
−Removed: Any gain or loss recognized by a Partnership on the disposition of contributed properties will be allocated first to the partners of the Partnership who contributed such properties to the extent of their built-in gain or loss on those properties for U.S.
−Removed: federal income tax purposes.
−Removed: The partners’ built-in gain or loss on such contributed properties will equal the difference between the partners’ proportionate share of the book value of those properties and the partners’ tax basis allocable to those properties at the time of the contribution.
−Removed: Any remaining gain or loss recognized by the Partnership on the disposition of the contributed properties, and any gain or loss recognized by the Partnership on the disposition of the other properties, will be allocated among the partners in accordance with their respective percentage interests in the Partnership.
−Removed: The Company’s share of any gain realized by a Partnership on the sale of any property held by the Partnership as inventory or other property held primarily for sale to customers in the ordinary course of the Partnership’s trade or business will be treated as income from a prohibited transaction that is subject to a 100% penalty tax.
−Removed: Such prohibited transaction income also may have an adverse effect upon the Company’s ability to satisfy the income tests for REIT status.
−Removed: Refer to the section entitled “—Requirements for Qualification—Gross Income Tests.” The Company, however, does not presently intend to acquire or hold or to allow any Partnership to acquire or hold any property that represents inventory or other property held primarily for sale to customers in the ordinary course of the Company’s or such Partnership’s trade or business.
−Removed: Treatment of Depositary Shares
−Removed: Owners of depositary shares will be treated for U.S.
−Removed: federal income tax purposes as if they were owners of the preferred stock represented by such depositary shares.
−Removed: Accordingly, such owners will be entitled to take into account, for U.S.
−Removed: federal income tax purposes, income and deductions to which they would be entitled if they were holders of such preferred stock.
−Removed: In addition, (i) no gain or loss will be recognized for U.S.
−Removed: federal income tax purposes upon the withdrawal of preferred stock to an exchange owner of depositary shares, (ii) the tax basis of each share of preferred stock to an exchanging owner of depositary shares will, upon such exchange, be the same as the aggregate tax basis of the depositary shares exchanged therefor, and (iii) the hold period for preferred stock in the hands of an exchanging owner of depositary shares will include the period during which such person owned such depositary shares.
−Removed: Legislative or Other Actions Affecting REITs
−Removed: The rules dealing with U.S.
−Removed: federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S.
−Removed: Treasury Department.
−Removed: The Company cannot give you any assurances as to whether, or in what form, any proposals affecting REITs or their stockholders will be enacted.
−Removed: Changes to the U.S.
−Removed: federal tax laws and interpretations thereof, possibly with retroactive effect, could adversely affect an investment in the Company’s stock.
−Removed: Stockholders should consult their tax advisors regarding the effect of potential changes to the U.S.
−Removed: federal tax laws and on an investment in our stock.
−Removed: State, Local and Foreign Taxes
−Removed: The Company and/or you may be subject to taxation by various states, localities and foreign jurisdictions, including those in which the Company or a stockholder transacts business, owns property or resides.
−Removed: The state, local and foreign tax treatment may differ from the U.S.
−Removed: federal income tax treatment described above.
−Removed: Consequently, you are urged to consult your tax advisors regarding the effect of state, local and foreign tax laws upon an investment in our stock.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
22 unchanged sentences
Summary of Significant Accounting Policies
−Removed: Equity Investments
+Added: Equity and Debt Investments
Goodwill, Deferred Leasing Costs and Other Intangibles
2 unchanged sentences
Noncontrolling Interests
−Removed: Assets and Related Liabilities Held for Disposition
−Removed: Discontinued Operations
Variable Interest Entities
5 unchanged sentences
Supplemental Disclosure of Cash Flow Information
+Added: Assets and Related Liabilities Held for Disposition
+Added: Discontinued Operations
Subsequent Events
7 unchanged sentences
We have audited the accompanying consolidated balance sheets of DigitalBridge Group, Inc.
−Removed: (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).
+Added: (the Company) as of December 31, 2022 and 2021 , the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2022 , and the related notes and financial statements schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021 , and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.
12 unchanged sentences
We believe that our audits provide a reasonable basis for our opinion.
−Removed: Critical Audit Matters
−Removed: The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:
−Removed: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
−Removed: The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
−Removed: Assets Held for Disposition and Related Losses and Impairments
−Removed: Description of the Matter As more fully disclosed in Notes 1, 11 and 12 to the consolidated financial statements, during the year ended December 31, 2021, the Company disposed of a substantial majority of its other equity and debt investments and its non-digital investment management business and executed agreements to sell its Wellness Infrastructure segment.
−Removed: As a result of these strategic shifts, the Company classified the related assets and liabilities as held for disposition on its consolidated balance sheets and recorded impairments and other losses of $ 625.3 million related to held for sale real estate assets, held for sale equity method investments, and held for sale loans receivable, all included as a component of loss from discontinued operations.
−Removed: Auditing the Company’s calculation and allocation of impairment and other losses related to the strategic dispositions is complex due to subjectivity in allocating the aggregate loss on sale to individual assets within the disposal group and, for sales that have not yet closed, in estimating the aggregate fair value and costs to sell of the disposal group.
−Removed: The inputs and assumptions utilized in the calculation and allocation of impairment and other losses included, but were not limited to, the estimated sales price based on actual or indicative transaction values, estimated closing adjustments, and the estimated fair values for certain individual assets which are measured at fair value on a recurring basis.
−Removed: Changes to these inputs or assumptions could have a material effect on the amount of impairment or other losses recognized as a component of loss from discontinued operations.
−Removed: How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to calculate and record the impairment and other losses related to assets held for disposition, including controls over management’s development and review of the significant inputs and assumptions used in the calculations.
−Removed: To test management’s calculations of impairments and other losses related to assets held for disposition, we obtained the supporting calculations and agreed key terms to the executed contracts and agreements and performed audit procedures over the calculation and allocation of impairment and other losses in each disposal group.
−Removed: These procedures included, but were not limited to, obtaining supporting documentation to substantiate key inputs used in the analysis, comparing estimated future cash flows to actual or indicative transaction values, evaluating the methodology used to allocate the aggregate sales price to individual assets included in each disposal group and testing the mathematical accuracy of management’s calculations.
+Added: Critical Audit Matter
+Added: The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:
+Added: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
+Added: The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Asset acquisitions—recognition of acquired assets
−Removed: Description of the Matter As more fully discussed in Note 3 to the consolidated financial statements, during the year ended December 31, 2021, the Company completed the acquisition of approximately $576.8 million of real estate and related intangible assets in its digital operating segment.
−Removed: As explained in Notes 2 and 3 to the consolidated financial statements, the transactions were accounted for as asset acquisitions, and as such, the transaction price was allocated to the acquired assets based upon their estimated fair values.
−Removed: Auditing the Company’s accounting for the acquisitions was complex due to the significant estimation required by management in determining the relative fair values of the acquired tangible and intangible assets.
−Removed: The significant estimation was primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of the tangible and intangible assets as well as the sensitivity of the respective fair values to the underlying assumptions.
−Removed: The Company utilized discounted cash flows, sales comparison, and direct cost approaches to measure the fair value of the acquired tangible and intangible assets.
−Removed: The more significant assumptions utilized included, but were not limited to, market revenues and discount rates.
−Removed: These significant assumptions are forward looking and could be affected by future economic and market conditions.
−Removed: How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for determining and reviewing the key inputs and assumptions used in estimating the fair values of acquired tangible and intangible assets, including controls over the Company’s review of the assumptions underlying the fair value analysis, the cash flow projections, and the accuracy of the underlying data used.
−Removed: For example, we tested controls over the determination of the fair value of acquired tangible and intangible assets, including the valuation models and underlying assumptions used to develop such estimates.
−Removed: To test the fair values of acquired tangible and intangible assets used in the purchase price allocation, we performed audit procedures that included, among others, evaluating the valuation methods and significant assumptions used by management, testing the completeness and accuracy of the underlying data supporting the determination of the various inputs, and testing its clerical accuracy.
−Removed: We also involved our valuation specialists to assist in evaluating the methodologies used by the Company, perform procedures to corroborate the reasonableness of the significant assumptions utilized in developing the fair value estimates, and perform corroborative calculations to assess the reasonableness of the acquired tangible and intangible assets.
+Added: Description of the Matter As more fully discussed in Note 3 to the consolidated financial statements, during the year ended December 31, 2022, the Company completed the acquisition of real estate and related intangible assets for total consideration of approximately $1.7 billion.
+Added: As explained in Notes 2 and 3 to the consolidated financial statements, the transactions were accounted for as asset acquisitions, and as such, the total consideration was allocated to the acquired assets and liabilities based upon their relative fair values.
+Added: Auditing the Company’s accounting for the acquisitions was complex due to the significant estimation required by management in estimating the relative fair values of the acquired tangible and intangible assets.
+Added: The significant estimation was primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of the tangible and intangible assets as well as the sensitivity of the respective fair values to the underlying inputs or assumptions.
+Added: The Company utilized the income approach (discounted cash flow method), sales comparison approach, and cost approach to estimate the fair value of the acquired tangible and intangible assets.
+Added: The determination of the relative fair value of the acquired tangible assets involved a higher degree of subjectivity due to the lack of availability of directly comparable market information, while the determination of the relative fair value of the acquired intangible assets involved a higher degree of subjectivity due to the use of market assumptions that are forward looking and could be affected by future economic or market conditions.
+Added: How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for allocating total consideration to the acquired tangible and intangible assets, including controls over the Company’s review of the inputs and assumptions used in the fair value analysis and accuracy of the underlying data used.
+Added: For example, we tested controls over the determination of the fair value of acquired tangible and intangible assets, including controls over the review of the valuation models and underlying assumptions used to develop such estimates.
+Added: To test the fair values of acquired tangible and intangible assets used in the purchase price allocation, we performed audit procedures that included, among others, evaluating the valuation methods and significant assumptions used by management, evaluating the sensitivity of changes in inputs or assumptions on the relative fair values of the acquired assets, testing the completeness and accuracy of the underlying data supporting the determination of the various inputs, and testing its clerical accuracy.
+Added: For a sample of acquired assets, we involved our valuation specialists to assist in evaluating the methodologies used by the Company, performed procedures to assess the reasonableness of the significant inputs or assumptions utilized in developing the fair value estimates, and performed comparative calculations to assess the reasonableness of the allocations to the acquired assets.
/s/ Ernst & Young LLP
13 unchanged sentences
5,921,298 4,972,284
−Removed: Loans receivable (at fair value) 173,921 36,798
−Removed: Equity investments ($ 201,912 and $ 247,025 at fair value)
+Added: Equity and debt investments ($ 506,081 and $ 201,912 at fair value)
1,322,050 935,153
+Added: Loans receivable (at fair value) 137,945 173,921
761,368 761,368
1 unchanged sentence
1,092,167 1,187,627
−Removed: Assets held for disposition 3,676,615 11,237,319
Other assets ($ 11,793 and $ 944 at fair value)
2 unchanged sentences
45,360 49,230
−Removed: $ 14,197,816 $ 20,200,560
+Added: Assets held for disposition 57,526 3,676,615
$ 11,028,503 $ 14,197,816
+Added: Debt, net $ 5,156,140 $ 4,860,402
Accrued and other liabilities ($ 183,628 and $ 37,970 at fair value)
3 unchanged sentences
Liabilities related to assets held for disposition 380 3,088,699
−Removed: Dividends and distributions payable
−Removed: 15,759 18,516
Total liabilities
13 unchanged sentences
Class B, 1,000 shares authorized;
−Removed: 666 and 734 shares issued and outstanding
+Added: 166 shares issued and outstanding
Additional paid-in capital
2 unchanged sentences
( 6,962,613 ) ( 6,576,180 )
−Removed: Accumulated other comprehensive income
−Removed: 42,383 122,123
+Added: Accumulated other comprehensive income (loss) ( 1,509 ) 42,383
Total stockholders’ equity 1,660,698 2,146,934
13 unchanged sentences
Property operating income $ 927,506 $ 762,750 $ 312,928
+Added: Fee income ($ 167,733 , $ 170,929 and $ 83,294 from affiliates)
+Added: 172,673 180,826 83,355
Interest income 30,107 8,791 7,206
−Removed: Fee income (from affiliates) 180,826 83,355 33,523
Other income ($ 4,337 , $ 10,185 and $ 8,828 from affiliates)
13 unchanged sentences
Other income (loss)
−Removed: Other loss, net ( 21,412 ) ( 6,493 ) ( 175,910 )
+Added: Other losses, net ( 170,555 ) ( 21,412 ) ( 6,493 )
Equity method earnings (losses) 19,412 127,270 ( 273,288 )
2 unchanged sentences
( 407,826 ) ( 317,361 ) ( 638,151 )
−Removed: Income tax benefit 100,538 47,063 10,615
+Added: Income tax benefit (expense) ( 13,467 ) 100,538 47,063
Loss from continuing operations ( 421,293 ) ( 216,823 ) ( 591,088 )
−Removed: Income (loss) from discontinued operations ( 600,088 ) ( 3,199,322 ) 400,573
+Added: Loss from discontinued operations ( 148,704 ) ( 600,088 ) ( 3,199,322 )
Net loss ( 569,997 ) ( 816,911 ) ( 3,790,410 )
5 unchanged sentences
( 321,797 ) ( 310,097 ) ( 2,675,759 )
−Removed: Preferred stock redemption (Note 9)
+Added: Preferred stock repurchases/redemptions (Note 9)
( 1,098 ) 4,992 —
34 unchanged sentences
(In thousands, except per share data)
−Removed: Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders’ Equity Noncontrolling Interests in Investment Entities Noncontrolling Interests in Operating Company Total Equity
+Added: Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Noncontrolling Interests in Investment Entities Noncontrolling Interests in Operating Company Total Equity
Balance at December 31, 2019 $ 999,490 $ 4,878 $ 7,553,599 $ ( 3,389,592 ) $ 47,668 $ 5,216,043 $ 3,254,188 $ 456,184 $ 8,926,415
1 unchanged sentence
— — — ( 3,187 ) — ( 3,187 ) ( 1,577 ) ( 349 ) ( 5,113 )
−Removed: Net income (loss) — — — ( 1,048,807 ) — ( 1,048,807 ) 990,360 ( 93,027 ) ( 151,474 )
−Removed: Other comprehensive income (loss) — — — — 34,637 34,637 ( 16,913 ) 3,234 20,958
+Added: Net loss — — — ( 2,675,759 ) — ( 2,675,759 ) ( 812,547 ) ( 302,720 ) ( 3,791,026 )
+Added: Other comprehensive income — — — — 73,991 73,991 106,173 8,143 188,307
Fair value of noncontrolling interests assumed in acquisitions
— — — — — — 366,136 — 366,136
−Removed: Deconsolidation of investment entities — — — — — — ( 6,235 ) — ( 6,235 )
−Removed: Redemption of preferred stock (Note 9)
+Added: Deconsolidation of investment entities (Note 20)
— — — — — — ( 80,921 ) — ( 80,921 )
3 unchanged sentences
Shares canceled for tax withholding on vested equity awards — ( 28 ) ( 7,721 ) — — ( 7,749 ) — — ( 7,749 )
−Removed: Issuance of OP Units as consideration for acquisition (Note 3)
+Added: Costs of noncontrolling interests — — ( 6,707 ) — — ( 6,707 ) — — ( 6,707 )
+Added: Warrant issuance (Note 10)
— — 20,240 — — 20,240 — — 20,240
13 unchanged sentences
Balance at December 31, 2020 $ 999,490 $ 4,841 $ 7,570,473 $ ( 6,195,456 ) $ 122,123 $ 2,501,471 $ 4,327,372 $ 155,747 $ 6,984,590
−Removed: Cumulative effect of adoption of new accounting guidance (Note 2)
+Added: Net loss — — — ( 310,097 ) — ( 310,097 ) ( 500,980 ) ( 40,511 ) ( 851,588 )
+Added: Other comprehensive loss — — — — ( 79,113 ) ( 79,113 ) ( 80,560 ) ( 8,272 ) ( 167,945 )
+Added: Redemption of preferred stock (Note 9)
( 145,258 ) — ( 4,992 ) — — ( 150,250 ) — — ( 150,250 )
−Removed: Net income (loss) — — — ( 2,675,759 ) — ( 2,675,759 ) ( 812,547 ) ( 302,720 ) ( 3,791,026 )
−Removed: Other comprehensive income (loss) — — — — 73,991 73,991 106,173 8,143 188,307
−Removed: Fair value of noncontrolling interests assumed in acquisition (Note 3)
+Added: Exchange of notes for common stock (Note 8)
— 734 181,473 — — 182,207 — — 182,207
−Removed: Deconsolidation of investment entities (Note 11)
+Added: Shares issued pursuant to settlement liability (Note 11)
— 60 46,982 — — 47,042 — — 47,042
−Removed: Common stock repurchases — ( 127 ) ( 24,622 ) — — ( 24,749 ) — — ( 24,749 )
−Removed: Warrant issuance (Note 10)
+Added: Deconsolidation of investment entities (Note 20)
— — 1,956 — ( 1,482 ) 474 ( 1,080,134 ) — ( 1,079,660 )
2 unchanged sentences
Shares canceled for tax withholding on vested equity awards — ( 29 ) ( 19,331 ) — — ( 19,360 ) — — ( 19,360 )
−Removed: Costs of noncontrolling interests — — ( 6,707 ) — — ( 6,707 ) — — ( 6,707 )
Contributions from noncontrolling interests — — — — — — 202,471 — 202,471
1 unchanged sentence
Preferred stock dividends — — — ( 70,627 ) — ( 70,627 ) — — ( 70,627 )
−Removed: Common stock dividends declared ($ 0.11 per share)
−Removed: — — — ( 52,854 ) — ( 52,854 ) — — ( 52,854 )
−Removed: Reallocation of equity (Note 2)
+Added: Reallocation of equity (Notes 2 and 10)
— — ( 11,605 ) — 855 ( 10,750 ) 4,682 6,068 —
6 unchanged sentences
Balance at December 31, 2021 $ 854,232 $ 5,692 $ 7,820,807 $ ( 6,576,180 ) $ 42,383 $ 2,146,934 $ 2,653,173 $ 112,283 $ 4,912,390
−Removed: Net income (loss) — — — ( 310,097 ) — ( 310,097 ) ( 500,980 ) ( 40,511 ) ( 851,588 )
−Removed: Other comprehensive income (loss) — — — — ( 79,113 ) ( 79,113 ) ( 80,560 ) ( 8,272 ) ( 167,945 )
−Removed: Redemption of preferred stock (Note 9)
+Added: Net loss — — — ( 321,797 ) — ( 321,797 ) ( 189,053 ) ( 32,369 ) ( 543,219 )
+Added: Other comprehensive loss — — — — ( 44,021 ) ( 44,021 ) ( 14,072 ) ( 3,747 ) ( 61,840 )
+Added: Stock repurchases ( 53,877 ) ( 168 ) ( 53,740 ) — — ( 107,785 ) — — ( 107,785 )
+Added: Cost of DataBank recapitalization — — ( 13,122 ) — — ( 13,122 ) ( 21,247 ) — ( 34,369 )
+Added: DataBank recapitalization (Note 10)
— — 230,238 — — 230,238 ( 230,238 ) — —
1 unchanged sentence
— 256 177,562 — — 177,818 — — 177,818
−Removed: Shares issued pursuant to settlement liability (Note 13)
+Added: Adjustment of redeemable noncontrolling interest and warrants to fair value (Note 10)
— — ( 725,026 ) — — ( 725,026 ) — — ( 725,026 )
+Added: Shares issued for redemption of redeemable noncontrolling interest (Note 10)
+Added: — 577 348,182 — — 348,759 — — 348,759
+Added: Transaction costs incurred in connection with redemption of redeemable noncontrolling interest — — ( 7,137 ) — — ( 7,137 ) — — ( 7,137 )
+Added: Reclassification of carried interest allocated to redeemable noncontrolling interest to noncontrolling interest in investment entities (Note 10)
+Added: — — — — — — 4,087 — 4,087
+Added: Assumption of deferred tax asset resulting from redemption of redeemable noncontrolling interest (Note 10)
+Added: — — 5,200 — — 5,200 — — 5,200
Deconsolidation of investment entities (Note 20)
— — — — — — ( 376,177 ) — ( 376,177 )
−Removed: Redemption of OP Units for common stock — 20 4,627 — — 4,647 — ( 4,647 ) —
−Removed: Equity awards issued, net of forfeitures — 66 51,224 — — 51,290 2,841 3,898 58,029
−Removed: Shares canceled for tax withholding on vested equity awards — ( 29 ) ( 19,331 ) — — ( 19,360 ) — — ( 19,360 )
+Added: Redemption of OP Units for cash and class A common stock — 4 337 — — 341 — ( 341 ) —
+Added: Equity-based compensation — 63 39,933 — — 39,996 12,834 2,498 55,328
+Added: Shares canceled for tax withholding on vested stock awards — ( 27 ) ( 18,212 ) — — ( 18,239 ) — — ( 18,239 )
+Added: Acquisition of noncontrolling interest — — — — — — ( 32,076 ) — ( 32,076 )
Contributions from noncontrolling interests — — — — — — 2,613,962 — 2,613,962
1 unchanged sentence
Preferred stock dividends — — — ( 61,401 ) — ( 61,401 ) — — ( 61,401 )
−Removed: Reallocation of equity (Note 2)
+Added: Common stock dividends declared ($ 0.02 per share)
— — — ( 3,235 ) — ( 3,235 ) — — ( 3,235 )
+Added: Reallocation of equity (Notes 2 and 10)
+Added: — — 13,046 — 129 13,175 — ( 13,175 ) —
Balance at December 31, 2022 $ 800,355 $ 6,397 $ 7,818,068 $ ( 6,962,613 ) $ ( 1,509 ) $ 1,660,698 $ 2,743,896 $ 64,895 $ 4,469,489
13 unchanged sentences
Amortization of deferred financing costs and debt discount and premium, net 106,410 65,129 15,602
−Removed: Equity method (gains) losses 7,248 463,866 87,444
+Added: Equity method (earnings) losses ( 389,584 ) 7,248 463,866
Distributions of income from equity method investments 127,887 3,054 102,612
−Removed: Provision for loan losses — — 35,880
Allowance for doubtful accounts — 3,294 7,247
5 unchanged sentences
Gain on sales of real estate, net — ( 49,429 ) ( 41,922 )
−Removed: Settlement of forward starting interest rate swap — — ( 365,111 )
−Removed: Deferred income tax benefit ( 68,454 ) ( 25,086 ) ( 9,602 )
−Removed: Loss on induced conversion of exchangeable debt 25,088 — —
+Added: Deferred income tax (benefit) expense 11,572 ( 68,454 ) ( 25,086 )
+Added: Loss on extinguishment of exchangeable notes 133,173 25,088 —
Other loss, net 22,245 60,231 211,967
(Increase) decrease in other assets and due from affiliates 35,372 ( 72,700 ) 14,392
−Removed: Increase (decrease) in accrued and other liabilities and due to affiliates 60,378 16,763 19,985
+Added: Increase in accrued and other liabilities and due to affiliates 148,980 67,719 16,763
Other adjustments, net ( 997 ) ( 7,484 ) ( 11,948 )
6 unchanged sentences
Repayments of loans receivable 23,956 485,613 227,831
−Removed: Proceeds from sales of loans receivable and debt securities 146,004 46,272 66,249
−Removed: Cash receipts in excess of accretion on purchased credit-impaired loans — — 31,128
+Added: Proceeds from sales of loans receivable and debt securities, including transfers of warehoused loans 401,002 146,004 46,272
Acquisition of and additions to real estate, related intangibles and leasing commissions ( 2,141,237 ) ( 828,361 ) ( 2,559,343 )
−Removed: Proceeds from sales of real estate 443,489 431,198 6,108,153
+Added: Proceeds from sales of real estate, including transfers of warehoused assets, net of property level cash transferred to buyer 162,268 408,391 431,198
Proceeds from paydown and maturity of debt securities 573 1,261 5,721
−Removed: Cash and restricted cash assumed by buyer upon sale of hotel portfolio in receivership ( 35,098 ) — —
Proceeds from sale of equity investments 522,337 564,025 287,899
4 unchanged sentences
— — ( 32,500 )
−Removed: Acquisition of DataBank, net of cash acquired (Note 3)
−Removed: — — ( 172,365 )
Other investing activities, net ( 769 ) ( 833 ) 1,111
−Removed: Net cash provided by (used in) investing activities 146,565 ( 1,931,980 ) 4,198,938
+Added: Net cash (used in) provided by investing activities ( 1,913,408 ) 146,565 ( 1,931,980 )
DigitalBridge Group, Inc.
6 unchanged sentences
Dividends paid to common stockholders ( 1,636 ) — ( 106,510 )
−Removed: Repurchase of common stock — ( 24,749 ) ( 10,734 )
−Removed: Proceeds from issuance of exchangeable senior notes — 291,000 —
−Removed: Repayment of senior notes ( 31,502 ) ( 370,998 ) —
−Removed: Borrowings from corporate credit facility and securitized financing facility 345,000 600,000 810,200
−Removed: Repayment of borrowings from corporate credit facility ( 45,000 ) ( 600,000 ) ( 810,200 )
−Removed: Borrowings from secured debt 2,094,722 2,016,833 4,664,450
−Removed: Repayments of secured debt ( 1,643,900 ) ( 1,684,001 ) ( 5,745,509 )
+Added: Repurchases of common stock ( 55,006 ) — ( 24,749 )
+Added: Debt borrowings 1,162,726 2,439,722 2,907,833
+Added: Debt repayments ( 514,505 ) ( 1,720,402 ) ( 2,654,999 )
Payment of deferred financing costs ( 18,688 ) ( 48,127 ) ( 54,750 )
Contributions from noncontrolling interests 2,625,612 232,144 1,906,250
−Removed: Distributions to and redemptions by noncontrolling interests ( 249,083 ) ( 360,304 ) ( 2,847,830 )
+Added: Distributions to and redemptions of noncontrolling interests ( 2,109,229 ) ( 249,083 ) ( 360,304 )
Contribution from Wafra
−Removed: Redemption of preferred stock ( 150,250 ) ( 402,855 ) —
+Added: Redemptions/repurchases of preferred stock ( 52,779 ) ( 150,250 ) ( 402,855 )
Shares canceled for tax withholdings on vested equity awards ( 18,239 ) ( 19,360 ) ( 7,749 )
+Added: Acquisition of noncontrolling interest ( 32,076 ) — —
Other financing activities, net — — ( 3,382 )
−Removed: Net cash provided by (used in) financing activities 411,260 1,373,027 ( 3,779,586 )
+Added: Net cash provided by financing activities 923,785 411,260 1,373,027
Effect of exchange rates on cash, cash equivalents and restricted cash ( 2,465 ) ( 2,825 ) 7,370
−Removed: Net increase (decrease) in cash, cash equivalents and restricted cash 803,237 ( 461,690 ) 591,968
+Added: Net (decrease) increase in cash, cash equivalents and restricted cash ( 729,506 ) 803,237 ( 461,690 )
Cash, cash equivalents and restricted cash—beginning of period
+Added: 1,766,245 963,008 1,424,698
Cash, cash equivalents and restricted cash—end of period
+Added: $ 1,036,739 $ 1,766,245 $ 963,008
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets
16 unchanged sentences
Business and Organization
−Removed: DigitalBridge Group, Inc.
−Removed: or DBRG (together with its consolidated subsidiaries, the "Company") is a leading global-scale digital infrastructure firm that invests, directly and through its portfolio companies, across five key verticals:
−Removed: data centers, cell towers, fiber networks, small cells, and edge infrastructure.
−Removed: Effective June 22, 2021, the Company changed its name to DigitalBridge Group, Inc.
−Removed: (formerly Colony Capital, Inc.) and trades under the ticker symbol, DBRG, signifying the Company's transformation to digital infrastructure.
−Removed: At December 31, 2021, the Company has $ 45 billion of total assets under management, including both third party capital and the Company's balance sheet.
+Added: DigitalBridge Group, Inc., or DBRG, (together with its consolidated subsidiaries, the "Company") is a leading global digital infrastructure investment manager.
+Added: The Company deploys and manages capital on behalf of its investors and shareholders across the digital infrastructure ecosystem, including data centers, cell towers, fiber networks, small cells, and edge infrastructure.
+Added: The Company's investment management platform is anchored by its flagship value-add digital infrastructure equity offerings, and has expanded to include offerings in core equity, credit and liquid securities.
+Added: In February 2023, the Company further expanded its investment offerings to encompass InfraBridge, a newly-acquired mid-market global infrastructure equity platform, which operates as a separate division of DBRG (Note 3).
The Company conducts all of its activities and holds substantially all of its assets and liabilities through its operating subsidiary, DigitalBridge Operating Company, LLC (the "Operating Company" or the "OP") .
1 unchanged sentence
The remaining 7 % is owned primarily by certain current and former employees of the Company as noncontrolling interests.
−Removed: The Company elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code for U.S.
−Removed: federal income tax purposes.
−Removed: Digital Transformation
−Removed: Significant healthcare and economic challenges arising from the coronavirus disease 2019 pandemic, or COVID-19, reinforced the critical role and the resilience of the digital infrastructure sector in a global economy that is increasingly reliant on telecommunications and data transmission.
−Removed: Accordingly, in the second quarter of 2020, the Company determined to accelerate its previously announced shift to a digitally-focused strategy in order to better position the Company for growth, which required a rotation of the Company's non-digital assets into digital-focused investments.
−Removed: The Company has now completed its digital transformation.
−Removed: The Company's completed disposition of its hotel business, OED investments and Other IM business in 2021, and its Wellness Infrastructure segment in 2022 each represents a strategic shift in the Company's business that has or is expected to have a significant effect on the Company’s operations and financial results, and accordingly, each has met the criteria as discontinued operations.
+Added: Transition to Taxable C Corporation
+Added: Following the completion of the Company's business transformation in the first quarter of 2022 (as described below) and due to the pace of growth of its investment management business and other strategic transactions that it may pursue, the Company’s Board of Directors and management agreed to discontinue actions necessary to maintain qualification as a real estate investment trust ("REIT") for 2022.
+Added: Commencing with the taxable year ended December 31, 2022, all of the Company’s taxable income, except for income generated by subsidiaries that have elected or anticipate electing REIT status, is subject to U.S.
+Added: federal and state income tax at the applicable corporate tax rate.
+Added: Dividends paid to stockholders are no longer tax deductible.
+Added: The Company is also no longer subject to the REIT requirement for distributions to stockholders when the Company has taxable income.
+Added: The Company anticipates that operating as a taxable C Corporation will provide the Company with flexibility to execute various strategic initiatives without the constraints of complying with REIT requirements.
+Added: This includes retaining and reinvesting earnings in other new initiatives in the investment management business.
+Added: The Company’s transition to a taxable C Corporation is not expected to result in significant incremental current income tax expense in the near term due to the availability of significant capital loss and net operating loss (“NOL”) carryforwards.
+Added: Furthermore, earnings from the Company's investment management business, which is conducted through its previously designated taxable REIT subsidiaries ("TRS"), remain the primary source of income subject to U.S.
+Added: federal and state income tax.
+Added: See Note 17 for additional information.
+Added: Business Transformation
+Added: In February 2022, the Company completed the disposition of substantially all of its non-digital assets.
+Added: This marked the completion of the Company's transformation from a REIT and investment manager in traditional real estate into an investment manager focused primarily on digital infrastructure.
+Added: The disposition of its hotel portfolio (March 2021), Other Equity and Debt ("OED") investments and non-digital investment management ("Other IM") business (December 2021), and Wellness Infrastructure portfolio (February 2022) each represented a strategic shift in the Company's business that had a significant effect on the Company’s operations and financial results, and accordingly, had met the criteria as discontinued operations.
For all current and prior periods presented, the related assets and liabilities, to the extent they have not been disposed at the respective balance sheet dates, are presented as assets and liabilities held for disposition on the consolidated balance sheets (Note 21), and the related operating results are presented as discontinued operations on the consolidated statements of operations (Note 22).
−Removed: Accelerating the Monetization of Wellness Infrastructure and Other Segments
−Removed: The Company successfully completed the sale of its equity interests in (i) NRF Holdco, LLC ("NRF Holdco"), which holds its Wellness Infrastructure business along with other non-core assets, in February 2022;
−Removed: and (ii) a substantial majority of its OED investments and Other IM business in December 2021, pursuant to agreements entered into in September 2021 (as amended in February 2022) and June 2021, respectively.
−Removed: In assessing the recoverability of assets classified as held for disposition and discontinued operations, in particular considering the sales price for the OED investments and Other IM business, and the Wellness Infrastructure assets, the Company wrote down the carrying value of these assets by $ 625.3 million in aggregate, of which $ 265.4 million was attributable to the OP.
−Removed: This was recorded within impairment loss, equity method loss and other loss in discontinued operations, as discussed further in Note 11.
−Removed: OED and Other IM
−Removed: The disposed OED investments and Other IM business were composed of the Company's interests in various non-digital real estate, real estate-related equity and debt investments, and the Company's general partner interests and management rights with respect to these assets.
−Removed: The Company received cash consideration of $443.4 million, net of closing adjustments of $31.2 million, representing net cash already received by the Company, largely for asset monetizations realized prior to closing.
−Removed: Disposition of the Company's equity interests in its OED subsidiaries resulted in assumption by the acquirer of $509.5 million of consolidated investment-level debt and subsequent deconsolidation of these subsidiaries.
−Removed: Wellness Infrastructure
−Removed: The Wellness Infrastructure business is composed of senior housing, skilled nursing facilities, medical office buildings, and hospitals.
−Removed: Other assets and obligations held by NRF Holdco include primarily:
−Removed: (i) the Company's equity interest in and management of its sponsored non-traded REIT, NorthStar Healthcare Income, Inc.
−Removed: ("NorthStar Healthcare"), debt securities collateralized largely by certain debt and preferred equity within the capital structure of the Wellness Infrastructure portfolio, limited partner interests in private equity real estate funds;
−Removed: and (ii) the 5.375% exchangeable senior notes, trust preferred securities and corresponding junior subordinated debt, all of which were issued by NRF Holdco and its subsidiaries.
−Removed: The sales price for 100% of the equity of NRF Holdco was $281 million, composed of $126 million in cash and $155 million unsecured promissory note (the "Seller Note").
−Removed: In addition, NRF Holdco distributed approximately $35 million of cash to the Company prior to closing.
−Removed: The Seller Note matures five years from closing of the sale, accruing paid-in-kind interest at 5.35% per annum.
−Removed: The sale included the acquirer's assumption of $2.57 billion of consolidated investment level debt on various healthcare portfolios in which the Company owned between 69.6% and 81.3%, and $293.7 million of debt at NRF Holdco.
−Removed: Internalization of BrightSpire Capital, Inc.
−Removed: In early April 2021, the Company and BRSP (formerly Colony Credit Real Estate, Inc.
−Removed: or CLNC) agreed to terminate the BRSP management agreement for a one-time termination payment of $102.3 million in cash.
−Removed: The transaction closed on April 30, 2021, resulting in the internalization of BRSP's management and operating functions (the "BRSP Internalization"), with certain of the Company's employees previously dedicated wholly or substantially to BRSP becoming employees of BRSP.
−Removed: In connection with the BRSP Internalization, BRSP's board of directors ceased to include Company-affiliated directors upon the expiration of such directors' terms in May 2021.
−Removed: The Company also entered into a stockholders agreement with BRSP, pursuant to which the Company agreed, for so long as the Company owns at least 10% of BRSP's outstanding common shares, to vote in BRSP director elections as recommended by BRSP’s board of directors at any stockholders' meeting that occurs prior to BRSP's 2023 annual stockholders' meeting.
−Removed: In addition, the Company is subject to customary standstill restrictions, including an obligation not to initiate or make stockholder proposals, nominate directors or participate in proxy solicitations, until the beginning of the advance notice window for BRSP's 2023 annual meeting.
−Removed: Except as aforementioned, the Company may vote its shares in its sole discretion in any votes of BRSP’s stockholders.
−Removed: The Company is prohibited from acquiring additional BRSP shares and currently holds a 29% equity ownership in BRSP following the sale of a portion of its BRSP shares in August 2021.
−Removed: Exit of the Hotel Business
−Removed: In March 2021, the Company completed the sale of its hotel business.
−Removed: Pursuant to an agreement entered into with a third party in September 2020 (as amended in October 2020, February 2021 and March 2021), the Company sold 100% of the equity in its hotel subsidiaries which held five of the six hotel portfolios in the Hospitality segment and its 55.6% equity interest in a portfolio of limited service hotels in the Other segment (the "THL Hotel Portfolio"), composed of 197 hotel properties in aggregate.
−Removed: Two of the hotel portfolios that were sold in the Hospitality segment were held through joint ventures in which the Company held a 90% and a 97.5% interest, respectively.
−Removed: The aggregate selling price of $67.5 million represented a transaction value of approximately $2.8 billion, with the acquirer's assumption of $2.7 billion of consolidated investment-level debt.
−Removed: In September 2021, the remaining interests in the THL Hotel Portfolio held by investment vehicles previously managed by the Company were sold to the same buyer.
−Removed: Also in September 2021, the remaining portfolio in the Hospitality segment that was in receivership was sold by the lender for no proceeds to the Company.
Summary of Significant Accounting Policies
The significant accounting policies of the Company are described below.
−Removed: The accounting policies of the Company's unconsolidated ventures are substantially similar to those of the Company.
Basis of Presentation
2 unchanged sentences
The portions of equity, net income and other comprehensive income of consolidated subsidiaries that are not attributable to the parent are presented separately as amounts attributable to noncontrolling interests in the consolidated financial statements.
−Removed: A substantial portion of noncontrolling interests represents interests held by private investment funds or other investment vehicles managed by the Company and which invest alongside the Company and membership interests in OP primarily held by certain employees of the Company.
−Removed: To the extent the Company consolidates a subsidiary that is subject to industry-specific guidance, the Company retains the industry-specific guidance applied by that subsidiary in its consolidated financial statements.
+Added: Noncontrolling interests represents predominantly the majority ownership held by third party investors in the Company's Operating segment, carried interest allocation to certain senior executives of the Company (Note 16), and membership interests in OP held by certain current and former employees of the Company.
+Added: To the extent the Company consolidates a subsidiary that is subject to industry-specific guidance such as investment company accounting applied by the Company's consolidated sponsored funds, the Company retains the industry-specific guidance applied by that subsidiary in its consolidated financial statements.
Use of Estimates
23 unchanged sentences
However, if the consolidation represents an asset acquisition of a voting interest entity, the Company's existing interest in the acquired assets, if any, is not remeasured to fair value but continues to be carried at historical cost.
−Removed: The Company may also deconsolidate a subsidiary as a result of this reassessment, which may result in a gain or loss recognized upon deconsolidation depending on the carrying values of deconsolidated assets and liabilities compared to the fair value of any interests retained.
+Added: The Company may also deconsolidate a subsidiary as a result of this reassessment, which may result in a gain or loss recognized upon
+Added: deconsolidation depending on the carrying values of deconsolidated assets and liabilities compared to the fair value of any interests retained.
Noncontrolling Interests
−Removed: Redeemable Noncontrolling Interests —This represents noncontrolling interests in the Company's digital investment management business and in consolidated open-end funds sponsored by the Company.
−Removed: The noncontrolling interests either have redemption rights that will be triggered upon the occurrence of certain events (Note 10) or have the ability to withdraw all or a portion of their interests from the consolidated open-end funds in cash with advance notice.
+Added: Redeemable Noncontrolling Interests —This represents noncontrolling interests in sponsored open-end funds in the Liquid Strategies that are consolidated by the Company.
+Added: The limited partners of these funds have the ability to withdraw all or a portion of their interests from the funds in cash with advance notice.
Redeemable noncontrolling interests is presented outside of permanent equity.
2 unchanged sentences
Such adjustments will be recognized in additional paid-in capital.
−Removed: Noncontrolling Interests in Investment Entities —This represents predominantly interests in consolidated investment entities held by co-investors through investment vehicles managed by the Company or held by third party joint venture partners.
−Removed: Allocation of net income or loss is generally based upon relative ownership interests held by equity owners in each investment entity, or based upon contractual arrangements that may provide for disproportionate allocation of economic returns among equity interests, including using a hypothetical liquidation at book value basis, where applicable and substantive.
−Removed: Noncontrolling Interests in Operating Company —This represents membership interests in OP held primarily by certain employees of the Company.
−Removed: Noncontrolling interests in OP are allocated a share of net income or loss in OP based on their weighted average ownership interest in OP during the period.
+Added: The redeemable noncontrolling interests in the Company's investment management business was redeemed in May 2022 (Note 10).
+Added: Noncontrolling Interests in Investment Entities —This represents predominantly the majority ownership held by third party investors in the Company's Operating segment and carried interest allocation to certain senior executives of the Company (Note 16).
+Added: Excluding carried interests, allocation of net income or loss is generally based upon relative ownership interests.
+Added: Noncontrolling Interests in Operating Company —This represents membership interests in OP held primarily by certain current and former employees of the Company.
+Added: Noncontrolling interests in OP are allocated a share of net income or loss in OP based upon their weighted average ownership interest in OP during the period.
Noncontrolling interests in OP have the right to require OP to redeem part or all of such member’s membership units in OP ("OP Units") for cash based on the market value of an equivalent number of shares of class A common stock at the time of redemption, or at the Company's election as managing member of OP, through issuance of shares of class A common stock (registered or unregistered) on a one -for-one basis.
4 unchanged sentences
Upon sale, complete or substantially complete liquidation of a foreign subsidiary, or upon partial sale of a foreign equity method investment, the translation adjustment associated with the investment, or a proportionate share related to the portion of equity method investment sold, is reclassified from accumulated other comprehensive income or loss into earnings.
−Removed: Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S.
−Removed: dollar are remeasured using the exchange rate in effect at the balance sheet date and the corresponding results of operations for such entities are remeasured using the average exchange rate in effect during the period.
−Removed: The resulting foreign currency remeasurement adjustments are recorded in other gain (loss) on the statements of operations.
+Added: Financial assets and liabilities denominated in a foreign currency for which the functional currency is the U.S.
+Added: dollar are remeasured using the exchange rate in effect at the balance sheet date, whereas non-financial assets and liabilities are remeasured using the exchange rate on the date the item was initially recognized (i.e., the historical rate), and the corresponding results of operations for such entities are remeasured using the average exchange rate in effect during the period.
+Added: The resulting foreign currency remeasurement adjustments are recorded in other gain (loss) on the consolidated statements of operations.
Disclosures of non-U.S.
8 unchanged sentences
Where the inputs used to measure the fair value of a financial instrument falls into different levels of the fair value hierarchy, the financial instrument is categorized within the hierarchy based on the lowest level of input that is significant to its fair value measurement.
+Added: Due to the inherently judgmental nature of Level 3 fair value, changes in assumptions or inputs applied as of reporting date could result in a higher or lower fair value, and realized value may differ from the estimated unrealized fair value.
Fair Value Option
14 unchanged sentences
Transaction costs related to acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred.
−Removed: The identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity are recognized and measured at their estimated fair values.
−Removed: The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity, net of fair value of any previously held interest in the acquired entity, is recorded as goodwill.
+Added: The identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity are recognized and measured at their estimated fair values, except as discussed below.
+Added: The excess of the consideration transferred over the value of identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity, net of fair value of any previously held interest in the acquired entity, is recorded as goodwill.
Such valuations require management to make significant estimates and assumptions.
+Added: With respect to contract assets and contract liabilities acquired in a business combination, these are not accounted for under the fair value basis at the time of acquisition.
+Added: Instead, the Company determines the value of these revenue contracts as if it had originated the acquired contracts by evaluating the associated performance obligations, transaction price and relative stand-alone selling price at the original contract inception date or subsequent modification dates.
Contingent Consideration —Contingent consideration is classified as a liability or equity, as applicable.
4 unchanged sentences
A business or asset group acquired in connection with a business combination that meets the criteria to be accounted for as held for sale at the date of acquisition is reported as discontinued operations, regardless of whether it meets the strategic shift criterion.
−Removed: The disposition of (i) NRF Holdco in February 2022, (ii) a substantial majority of the OED investments and Other IM business in December 2021, (iii) the hotel business, composed of the Hospitality segment and the THL Hotel Portfolio in March 2021, and (iv) the bulk and light industrial portfolios in December 2020 and December 2019, respectively, all represent strategic shifts that have or are expected to have major effects on the Company’s operations and financial results, and have met the criteria as discontinued operations as of June 2021, March 2021, September 2020, and June 2019, respectively.
+Added: The disposition of (i) NRF Holdco, LLC ("NRF Holdco"), a former subsidiary of the Company that held the Wellness Infrastructure business, in February 2022, (ii) a substantial majority of the OED investments and Other IM business in December 2021, (iii) the hotel business, composed of the Hospitality segment and the THL Hotel Portfolio in March 2021, and (iv) the bulk and light industrial portfolios in December 2020 and December 2019, respectively, all represent strategic shifts that have or are expected to have major effects on the Company’s operations and financial results, and have met the criteria as discontinued operations as of June 2021, March 2021, September 2020, and June 2019, respectively.
Accordingly, for all prior periods presented, the related assets and liabilities are presented as assets and liabilities held for disposition on the consolidated balance sheets (Note 21) and the related operating results are presented as income (loss) from discontinued operations on the consolidated statements of operations (Note 22).
3 unchanged sentences
The Company's cash and cash equivalents are held with major financial institutions and may at times exceed federally insured limits.
+Added: Also included are unrestricted cash held by subsidiaries in third party accounts that have the general characteristics of demand deposits.
Restricted Cash
40 unchanged sentences
Fair value of foreclosed properties is generally based on third party appraisals, broker price opinions, comparable sales or a combination thereof.
−Removed: Loans Receivable
−Removed: Loans that the Company has the intent and ability to hold for the foreseeable future are classified as held for investment.
−Removed: Loans that the Company intends to sell or liquidate in the foreseeable future are classified as held for disposition.
−Removed: Interest income is recognized based upon contractual interest rate and unpaid principal balance of the loans.
−Removed: Loans that are past due 90 days or more as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming, with reversal of interest income and suspension of interest income recognition.
−Removed: Recognition of interest income may be restored when all principal and interest are current and full repayment of the remaining contractual principal and interest are reasonably assured.
−Removed: Effective January 1, 2020, the Company elected the fair value option for all loans receivable.
−Removed: Loan fair values are generally determined either:
−Removed: by comparing the current yield to the estimated yield of newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment;
−Removed: or based upon discounted cash flow projections of principal and interest expected to be collected, which projections include, but are not limited to, consideration of the financial standing of the borrower or sponsor as well as operating results and/or value of the underlying collateral.
−Removed: For loans that are nonperforming where recognition of interest income is suspended, any interest subsequently collected is recognized on a cash basis by crediting income when received.
−Removed: Origination and other fees charged to the borrower are recognized immediately as interest income when earned.
−Removed: Costs to originate or purchase loans are expensed as incurred.
Equity Investments
16 unchanged sentences
The Company recognizes earnings based on its proportionate share of results from these investment vehicles and a disproportionate allocation of returns based on the extent to which cumulative performance exceeds minimum return hurdles pursuant to terms of their respective governing agreements (“carried interests”).
−Removed: To the extent the investment vehicles qualify for investment company accounting, their underlying results and consequently, the calculation of carried interests, reflect changes in fair value of their investments each period.
−Removed: The amount of carried interest recognized based on the cumulative performance of each investment vehicle if it were liquidated as of the reporting date may be subject to reversal until such time the carried interest, if any, is realized.
−Removed: Realization of carried interest generally occurs upon disposition of all underlying investments of an investment vehicle, or in part with each disposition, pursuant to the governing documents of the investment vehicles.
+Added: Carried interest generally arises when appreciation in value of the underlying investments of the fund exceeds the minimum return hurdles, after factoring in a return of invested capital and a return of certain costs of the fund pursuant to terms of the governing documents of the fund.
+Added: The amount of carried interest recognized is based upon the cumulative performance of the fund if it were liquidated as of the reporting date.
+Added: Unrealized carried interest is driven primarily by changes in fair value of the underlying investments of the fund, which could be affected by various factors, including but not limited to the financial performance of the portfolio company, economic conditions, foreign exchange rates, comparable transactions in the market, and equity prices for publicly traded securities.
+Added: Unrealized carried interest may be subject to reversal until such time it is realized.
+Added: Realization of carried interest occurs upon disposition of all underlying investments of the fund, or in part with each disposition.
+Added: Generally, carried interest is distributed upon profitable disposition of an investment if at the time of distribution, cumulative returns of the fund exceed minimum return hurdles.
+Added: Depending on the final realized value of all investments at the end of the life of a fund (and, with respect to certain funds, periodically during the life of the fund), if it is determined that cumulative carried interest distributions have exceeded the final carried interest amount earned (or amount earned as of the calculation date), the Company is obligated to return the excess carried interest received.
+Added: Therefore, carried interest distributions may be subject to clawback if decline in investment values results in cumulative performance of the fund falling below minimum return hurdles in the interim period.
+Added: If it is determined that the Company has a clawback obligation, a liability would be established based upon a hypothetical liquidation of the net assets of the fund at reporting date.
+Added: The actual determination and required payment of any clawback obligation would generally occur after final disposition of the investments of the fund or otherwise as set forth in the governing documents of the fund.
Evaluation of impairment applies to equity method investments and equity investments under the measurement alternative.
8 unchanged sentences
Impairment loss is recorded in equity method earnings for equity method investments and in other gain (loss) for investments under the measurement alternative.
+Added: Loans Receivable
+Added: Loans that the Company has the intent and ability to hold for the foreseeable future are classified as held for investment.
+Added: Loans that the Company intends to sell or liquidate in the foreseeable future are classified as held for disposition.
+Added: Interest income is recognized based upon contractual interest rate and unpaid principal balance of the loans.
+Added: Loans that are past due 90 days or more as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming, with reversal of interest income and suspension of interest income recognition.
+Added: Recognition of interest income may be restored when all principal and interest are current and full repayment of the remaining contractual principal and interest are reasonably assured.
+Added: The Company has elected the fair value option for all loans receivable.
+Added: Loan fair values are generally determined either:
+Added: by comparing the current yield to the estimated yield of newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment;
+Added: or based upon discounted cash flow projections of principal and interest expected to be collected, which projections include, but are not limited to, consideration of the financial standing of the borrower or sponsor as well as operating results and/or value of the underlying collateral.
+Added: For loans that are nonperforming where recognition of interest income is suspended, any interest subsequently collected is recognized on a cash basis by crediting income when received.
+Added: Origination and other fees charged to the borrower are recognized immediately as interest income when earned.
+Added: Costs to originate or purchase loans are expensed as incurred.
Debt Securities
5 unchanged sentences
The accretable yield is the excess of current expected cash flows to be collected over the net investment in the security, including the yield accreted to date.
−Removed: The Company evaluates estimated future cash flows expected to be collected on a quarterly basis,
−Removed: starting with the first full quarter after acquisition, or earlier if conditions indicating impairment are present.
+Added: The Company evaluates estimated future cash flows expected to be collected on a quarterly basis, starting with the first full quarter after acquisition, or earlier if conditions indicating impairment are present.
If the cash flows expected to be collected cannot be reasonably estimated, either at acquisition or in subsequent evaluation, the Company may consider placing the securities on nonaccrual, with interest income recognized using the cost recovery method.
4 unchanged sentences
The non-credit loss component is recognized in other comprehensive income or loss ("OCI").
−Removed: The allowance is charged off against the amortized cost basis of the security if in a subsequent period, the Company intends to or more likely than not will be required to sell the security, or if the Company deems the security to be uncollectable.
+Added: The allowance is charged off against the amortized cost basis of the security if in a subsequent period, the Company intends to or more likely than not will be required to sell the security, or if the Company deems the security to be uncollectible.
In assessing impairment and estimating future expected cash flows, factors considered include, but are not limited to, credit rating of the security, financial condition of the issuer, defaults for similar securities, performance and value of assets underlying an asset-backed security.
22 unchanged sentences
Customer service contracts are amortized on a straight-line basis over the remaining term of the respective contracts, and if the service contract is terminated, the remaining unamortized balance is charged off.
−Removed: Customer relationships represent incremental net cash flows to the business that is attributable to these in-place relationships, and is amortized on a straight-line basis over its estimated useful life.
+Added: Customer relationships represent incremental
+Added: net cash flows to the business that is attributable to these in-place relationships, and is amortized on a straight-line basis over its estimated useful life.
Trade names are recognized as a separate identifiable intangible asset to the extent the Company intends to continue using the trade name post-acquisition.
20 unchanged sentences
The Company estimates allowance for doubtful accounts for specific accounts receivable balances based upon historical collection trends, age of outstanding accounts receivables and existing economic conditions associated with the receivables.
−Removed: Cost Reimbursements and Recoverable Expenses —The Company is entitled to reimbursements and/or recovers certain costs paid on behalf of investment vehicles managed by the Company, which include:
−Removed: (i) organization and offering costs associated with the formation and capital raising of the investment vehicles subject to certain limitations;
−Removed: (ii) direct and indirect operating costs associated with managing the operations of certain investment vehicles;
−Removed: and (iii) costs
−Removed: incurred in performing investment due diligence.
+Added: Cost Reimbursements and Recoverable Expenses —The Company is entitled to reimbursements and/or recovers certain costs paid on behalf of investment vehicles sponsored by the Company, which include:
+Added: (i) organization and offering costs associated with the formation and capital raising of the investment vehicles up to specified thresholds;
+Added: (ii) costs incurred in performing investment due diligence;
+Added: and (iii) direct and indirect operating costs associated with managing the operations of certain investment vehicles.
Indirect operating costs are recorded as expenses of the Company when incurred and amounts allocated and reimbursable are recorded as other income in the consolidated statements of operations.
5 unchanged sentences
Major replacements and betterments which improve or extend the life of assets are capitalized and depreciated over their useful life.
−Removed: Depreciation and amortization is recognized on a straight-line basis over the estimated useful life of the assets, which range between 3 to 7 years for furniture, fixtures, equipment and capitalized software, and over the shorter of the lease term or useful life for leasehold improvements.
+Added: Depreciation and amortization is recognized on a straight-line basis over the estimated useful life of the assets, which range between 3 and 7 years for furniture, fixtures, equipment and capitalized software, and over the shorter of the lease term or useful life for leasehold improvements.
Transfers of Financial Assets
32 unchanged sentences
A lease is classified as an operating lease when none of the criteria are met.
+Added: The Company also made the accounting policy election to treat lease and nonlease components in a lease contract as a single component.
The Company's leasing arrangements are composed primarily of finance and operating leases for data centers, operating ground leases for other investment properties, and operating leases for its corporate offices.
26 unchanged sentences
and (ii) variable lease income for tenant reimbursements, installation services of Company-owned data center equipment and additional metered power reimbursements based upon usage by data center tenants at prevailing rates.
−Removed: As lessor, the Company made the accounting policy election to treat the lease and nonlease components in a lease contract as a single component to the extent that the timing and pattern of transfer are similar for the lease and nonlease components and the lease component qualifies as an operating lease.
−Removed: Accordingly, the nonlease components of tenant reimbursements for net leases, interconnection services, installation services of Company-owned data center equipment and payments for power by data center tenants are combined with their respective lease components and accounted for as a single lease component as the lease component is predominant.
+Added: As lessor, the classification of a lease as a sales-type lease is similar to the criteria for a finance lease as lessee (discussed above).
+Added: If none of the criteria are met, a lease may be classified as a direct financing lease if there is a residual value guarantee from an unrelated third party.
+Added: Otherwise, all other leases are classified as operating, including leases with variable lease payments that are not based upon a rate or index where classification as sales-type or direct financing lease would result in a loss to the Company at lease commencement.
+Added: The Company's lease contracts contain lease components, such as leased data center space and equipment, and nonlease components, such as tenant reimbursements for net leases, interconnection services, installation services of Company-owned data center equipment and payments for power by data center tenants.
+Added: As lessor, the Company made the accounting policy election to account for the lease components and nonlease components in its lease contracts as a single component in instances where the lease component is predominant, the timing and pattern of transfer for the lease and nonlease components are the same (i.e., provided on a consistent basis over the same time period), and the lease component, if accounted for separately, would be classified as an operating lease.
Rental Income and Tenant Reimbursements
14 unchanged sentences
If collection is subsequently determined to no longer be probable, any previously accrued lease income that has not been collected is subject to reversal.
−Removed: If collection is subsequently determined to be probable,
−Removed: lease income and corresponding receivable would be reestablished to an amount that would have been recognized if collection had always been deemed to be probable.
+Added: If collection is subsequently determined to be probable, lease income and corresponding receivable would be reestablished to an amount that would have been recognized if collection had always been deemed to be probable.
Costs to Execute Lease —Only incremental costs of obtaining a lease, such as leasing commissions, qualify as initial direct leasing costs to be capitalized.
1 unchanged sentence
Resident Fee Income
−Removed: Resident fee income, presented within discontinued operations, is earned from senior housing operating facilities that operate through management agreements with independent third-party operators.
−Removed: Resident fee income related to independent living and assisted living facilities is recorded when services are rendered based on terms of their respective lease agreements.
+Added: Resident fee income, presented within discontinued operations, was earned from senior housing operating facilities that operate through management agreements with independent third-party operators.
+Added: Resident fee income related to independent living and assisted living facilities was recorded when services were rendered based on terms of their respective lease agreements.
The Company's healthcare business was sold in February 2022.
2 unchanged sentences
Hotel Operating Income
−Removed: Hotel operating income, presented within discontinued operations, includes room revenue, food and beverage sales and other ancillary services.
−Removed: Revenue is recognized upon occupancy of rooms, consummation of sales and provision of services.
+Added: Hotel operating income, presented within discontinued operations, included room revenue, food and beverage sales and other ancillary services.
+Added: Revenue was recognized upon occupancy of rooms, consummation of sales and provision of services.
The Company's hotel business was sold in March 2021, with one remaining portfolio that was in receivership sold by the lender in September 2021.
2 unchanged sentences
Management fees are recognized over the life of the investment vehicle as services are provided.
−Removed: Incentive Fees —The Company is entitled to incentive fees from funds and managed accounts in its liquid securities strategy.
−Removed: Incentive fees are determined based upon the performance of the respective funds or accounts, subject to the achievement of specified return thresholds in accordance with the terms set out in their respective governing agreements.
+Added: The governing documents of the investment vehicles may provide for certain fee credits or offsets to management fees.
+Added: Such amounts include primarily organizational costs of the investment vehicle in excess of prescribed thresholds, termination or similar fees paid in connection with unconsummated investments that are reimbursable by the investment vehicle, and directors' fees paid by portfolio companies to employees of the Company in their capacity as non-management directors.
+Added: These fee credits or offsets represent a component of the transaction price for the Company's provision of investment management services and are applied to reduce management fees payable to the Company.
+Added: Incentive Fees —The Company is entitled to incentive fees from sub-advisory accounts in its Liquid Strategies.
+Added: Incentive fees are determined based upon the performance of the respective accounts, subject to the achievement of specified return thresholds in accordance with the terms set out in their respective governing agreements.
Incentive fees take the form of a contractual fee arrangement, and unlike carried interests, do not represent an allocation of returns among equity holders of an investment vehicle.
8 unchanged sentences
Equity Awards Granted by Managed Companies —These were equity awards granted to the Company to be granted
−Removed: to its employees or granted directly to its employees by publicly-traded REITs previously managed by the Company, NRE (prior to the sale of NRE in September 2019) and BRSP (prior to termination of its management agreement in April 2021).
+Added: to its employees or granted directly to its employees by BrightSpire Capital, Inc.
+Added: ("BRSP"), a publicly-traded REIT previously managed by the Company (prior to termination of its management agreement in April 2021).
The initial grant was recorded as an other asset and deferred income liability on the balance sheet.
−Removed: The liability was amortized on a straight-line basis to other income over the initial vesting period of the award and equity-based
−Removed: compensation expense was recognized as the award vested to the recipient employee.
+Added: The liability was amortized on a straight-line basis to other income over the initial vesting period of the award and equity-based compensation expense was recognized as the award vested to the recipient employee.
Compensation expense related to equity awards granted by managed companies is presented within discontinued operations.
5 unchanged sentences
Carried interest and incentive fee compensation are generally not paid to management or other employees until the related carried interest and incentive fee amounts are distributed by the investment vehicles to the Company.
+Added: If the related carried interest distributions received by the Company are subject to clawback, the previously distributed carried interest compensation would be similarly subject to clawback from employees.
+Added: The Company generally withholds a portion of the distribution of carried interest compensation to employees to satisfy their potential clawback obligation.
+Added: The amount withheld resides in entities outside of the Company.
Equity-Based Compensation —Equity-classified stock awards granted to employees and non-employees that have a service condition and/or a market or performance condition are measured at fair value at date of grant.
2 unchanged sentences
Total compensation cost recognized for a modified award, however, cannot be less than its grant date fair value, unless at the time of modification, the service or performance condition of the original award was not expected to be satisfied.
+Added: An award that is probable of vesting both before and after modification will result in incremental compensation cost only if terms affecting its estimate of fair value have been modified.
Liability-classified stock awards are remeasured at fair value at the end of each reporting period until the award is fully vested.
3 unchanged sentences
Compensation expense is adjusted for actual forfeitures upon occurrence.
−Removed: A REIT is generally not subject to corporate-level federal and state income tax on net income it distributes to its stockholders.
−Removed: To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of its REIT taxable income to its stockholders.
−Removed: If the Company fails to qualify as a REIT in any taxable year and if the statutory relief provisions were not to apply, the Company would be subject to federal and state income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent taxable years.
−Removed: Even if the Company qualifies as a REIT, it and its subsidiaries may be subject to certain U.S federal, state and local as well as foreign taxes on its income and property and to U.S federal income and excise taxes on its undistributed taxable income.
−Removed: The Company has elected or may elect to treat certain of its existing or newly created corporate subsidiaries as taxable REIT subsidiaries (each a “TRS”).
−Removed: In general, a TRS may perform non-customary services for tenants of the REIT, hold assets that the REIT cannot or does not intend to hold directly and, subject to certain exceptions related to hotels and healthcare properties, may engage in any real estate or non-real estate related business.
−Removed: The Company uses TRS entities to conduct certain activities that cannot be conducted directly by a REIT, such as investment management, property management including hotel and healthcare operations as well as loan servicing and workout activities.
−Removed: A TRS is treated as a regular, taxable corporation for U.S income tax purposes and therefore, is subject to U.S federal corporate tax on its income and property.
−Removed: Additionally, the Company has invested in real estate assets in foreign countries for which related earnings or other measures are subject to income taxes in the respective foreign jurisdictions, and in some cases, the repatriation of earnings are subject to withholding taxes.
−Removed: Deferred Income Taxes —The provision for income taxes includes current and deferred portions.
−Removed: The Company uses the asset and liability method to provide for income taxes, which requires that the Company's income tax expense reflect the expected future tax consequences of temporary differences between the carrying amounts of assets or liabilities for financial reporting versus income tax purposes.
−Removed: Accordingly, a deferred tax asset or liability for each temporary difference is determined based on enacted tax rates that the Company expects to be in effect when the underlying items of income and expense are realized and the differences reverse.
−Removed: A deferred tax asset is also recognized for net operating loss ("NOL") carryforwards of the TRS and foreign taxable entities.
−Removed: A valuation allowance for deferred tax assets is established if the Company believes it is more likely than not that all or some portion of the deferred tax assets will not be realized.
−Removed: Realization of deferred tax assets is dependent on the Company's TRS and foreign taxable entities generating sufficient taxable income in future periods or employing certain tax planning strategies to realize such deferred tax assets.
−Removed: Uncertain Tax Positions —Income tax benefits are recognized for uncertain tax positions that are more likely than not to be sustained based solely on their technical merits.
+Added: Provision for income taxes consists of a current and deferred component.
+Added: Current income taxes represent income tax to be paid or refunded for the current period.
+Added: The Company uses the asset and liability method to provide for income taxes, which requires that the Company's income tax provision reflect the expected future tax consequences of temporary differences between the carrying amounts of assets or liabilities for financial reporting versus for income tax purposes.
+Added: Accordingly, a deferred tax asset or liability for each temporary difference is determined based on enacted tax rates that the Company expects to be in effect upon realization of the underlying amounts when they become deductible or taxable and the differences reverse.
+Added: A deferred tax asset is also recognized for NOL, capital loss and tax credit carryforwards.
+Added: A valuation allowance for deferred tax assets is established if the Company believes it is more likely than not that all or some portion of the deferred tax assets will not be realized based upon the weight of all available positive and negative evidence.
+Added: Realization of deferred tax assets is dependent upon the adequacy of future expected taxable income from all
+Added: sources, including reversal of taxable temporary differences, forecasted earnings and prudent and feasible tax planning strategies.
+Added: An established valuation allowance may be reversed in a future period if the Company subsequently determines it is more likely than not that all or some portion of the deferred tax asset will become realizable.
+Added: Uncertain Tax Positions
+Added: Income tax benefits are recognized for uncertain tax positions that are more likely than not to be sustained based solely on their technical merits.
Such uncertain tax positions are measured as the largest amount of benefit that is more likely than not to be realized upon settlement.
1 unchanged sentence
The Company evaluates on a quarterly basis whether it is more likely than not that its uncertain tax positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations.
+Added: The evaluation of uncertain tax positions is based upon various factors including, but not limited to, changes in tax law, measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity, and changes in facts or circumstances related to a tax position.
+Added: Income tax related interests and penalties, if any, are included as a component of income tax benefit (expense).
Earnings Per Share
9 unchanged sentences
Reclassifications
−Removed: Reclassifications were made related to discontinued operations as discussed in "—Discontinued Operations" above and to prior period segment reporting presentation as discussed in Note 20.
−Removed: Additionally, costs related to unconsummated transactions that were previously included within investment and servicing expense in prior periods have been reclassified as transaction-related costs on the consolidated statement of operations to conform to current period presentation.
+Added: Certain prior period amounts disclosed within the notes to the consolidated financial statements have been reclassified to conform to current period presentation.
These reclassifications did not affect the Company's financial position, results of operations or cash flows.
5 unchanged sentences
partially offset by (ii) a $ 3.3 million increase to beginning equity, reflecting the cumulative effect adjustment of the Company's election of the fair value option for all of its then outstanding loans receivable.
−Removed: On January 1, 2019, upon adoption of ASC 842, Leases , the Company determined that collection of certain operating lease receivables, net of existing allowance for bad debts, was not probable and recorded a cumulative adjustment of approximately $ 4.5 million to reduce beginning equity.
Accounting Standards Adopted in 2022
−Removed: Income Tax Accounting
−Removed: In December 2019, the FASB issued ASU No.
−Removed: 2019-12, Simplifying Accounting for Income Taxes .
−Removed: The ASU simplifies accounting for income taxes by eliminating certain exceptions to the general approach in ASC 740, Income Taxes, and clarifies certain aspects of the guidance for more consistent application.
−Removed: The simplifications relate to intraperiod tax allocations when there is a loss in continuing operations and a gain outside of continuing operations, accounting for tax law or tax rate changes and year-to-date losses in interim periods, recognition of deferred tax liability for outside basis difference when investment ownership changes, and accounting for franchise taxes that are partially based on income.
−Removed: The ASU also provides new guidance that clarifies the accounting for transactions resulting in a step-up in tax basis of goodwill, among other changes.
−Removed: Transition is generally prospective, other than the provision related to outside basis difference which is on a modified retrospective basis with cumulative effect adjusted to retained earnings at the beginning of the period adopted, and franchise tax provision which is on either full or modified retrospective.
−Removed: The Company adopted the new guidance on January 1, 2021, with no material effect to its consolidated financial statements upon adoption.
−Removed: Accounting for Certain Equity Investments
−Removed: In January 2020, the FASB issued ASU No.
−Removed: 2020-01, Clarifying the Interactions between Topic 321 Investments—Equity Securities, Topic 323—Investments Equity Method and Joint Ventures, and Topic 815—Derivatives and Hedging .
−Removed: The ASU clarifies that if as a result of an observable transaction, an equity investment under the measurement alternative is transitioned into equity method and vice versa, an equity method investment is transitioned into measurement alternative, the investment is to be remeasured immediately before and after the transaction, respectively.
−Removed: The ASU also clarifies that certain forward contracts or purchased options to acquire equity securities that are not deemed to be derivatives or in-substance common stock will generally be measured using the fair value principles of ASC 321 before settlement or exercise, and that an entity should not be considering how it will account for the resulting investments upon eventual settlement or exercise.
−Removed: 2020-01 is to be applied prospectively.
−Removed: The Company adopted the new guidance on January 1, 2021, with no resulting effect upon adoption.
−Removed: Accounting for Convertible Instruments and Contracts on Entity's Own Equity
−Removed: In August 2020, the FASB issued ASU No.
−Removed: 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):
−Removed: Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .
−Removed: The ASU (1) simplifies an issuer’s accounting for convertible instruments as a single unit of account;
−Removed: (2) allows more contracts on an entity’s own equity to qualify for equity classification and more embedded derivatives meeting the derivative scope exception;
−Removed: and (3) simplifies diluted EPS computation.
−Removed: • The guidance eliminates the requirement to separate embedded conversion features in convertible instruments, except for (1) a convertible instrument that contains features requiring bifurcation as a derivative under ASC 815 or (2) a convertible debt instrument that was issued at a substantial premium.
−Removed: Separate accounting for embedded conversion features as an equity component under the cash conversion and beneficial conversion models has been eliminated.
−Removed: • Under the new guidance, certain conditions under Subtopic ASC 815-40 that may result in contracts being settled in cash rather than shares and therefore preclude (1) equity classification for contracts on an entity’s own equity;
−Removed: and (2) embedded derivatives from qualifying for the derivative scope exception, have been removed;
−Removed: for example, the requirement that equity contracts permit settlement in unregistered shares unless such contracts explicitly require settlement in cash if registered shares are unavailable.
−Removed: The guidance also clarifies that freestanding contracts on an entity’s own equity that do not qualify for equity classification under the indexation criteria (ASC 815-40-15) or settlement criteria (ASC 815-40-25) are to be measured at fair value through earnings, even if they do not meet the definition of a derivative under ASC 815.
−Removed: • The ASU also amends certain guidance on computation of diluted EPS for convertible instruments and contracts on an entity’s own equity that results in a more dilutive EPS, including (1) requiring the if converted method to be applied for all convertible instruments (the treasury stock method is no longer available), and (2) removing the ability to rebut the presumption of share settlement for contracts that may be settled in cash or stock and that are not liability classified share based payments.
−Removed: • Expanded disclosures are required, including but not limited to, (1) terms and features of convertible instruments and contracts on entity’s own equity;
−Removed: and (2) information about events, conditions, and circumstances that could
−Removed: affect amount or timing of future cash flows related to these instruments or contracts;
−Removed: and in the period of adoption (3) nature of and reason for the change in accounting principle;
−Removed: and (4) effects of the change on EPS.
−Removed: Upon adoption, a one-time election may be made to apply the fair value option for any liability-classified convertible securities.
−Removed: Adoption of the new standard may be made either on a full retrospective approach or a modified retrospective approach, with cumulative effect adjustment recorded to beginning retained earnings.
−Removed: The Company early adopted the new guidance on January 1, 2021 using a modified retrospective approach, with no resulting effect upon adoption.
−Removed: Accounting Standards Pending Adoption
Amendment to Lessor Accounting
−Removed: In July 2021, the FASB issued ASU No.
+Added: In July 2021, the Financial Accounting Standards Board ("FASB") issued ASU No.
2021-5, Lessors—Certain Leases with Variable Lease Payments , which amends existing lease classification guidance for lessors to better reflect the economics of certain lease arrangements.
−Removed: The ASU requires a lease with variable lease payments that are not based upon a rate or index to be classified as an operating lease if classification as a direct financing lease or sales-type lease would have resulted in a loss to the lessor at lease commencement.
+Added: The ASU requires a lease with variable lease payments that are not based upon a rate or index to be classified as an operating lease if classification as a direct financing lease or sales-type lease
+Added: would have resulted in a loss to the lessor at lease commencement.
A loss could have otherwise arisen even if the lease is expected to be profitable as the exclusion of these variable lease payments result in the recognition of a lower net investment in a lease relative to the carrying value of the underlying asset that is derecognized at the commencement of a direct financing or sales-type lease.
Under the amended guidance, this uneconomic outcome is avoided because the classification as an operating lease does not result in a derecognition of the underlying asset by the lessor, and the recognition of variable lease payments earned and depreciation expense on the underlying asset will partially offset in earnings over time.
−Removed: The ASU is effective January 1, 2022 and can be applied either retrospectively to leases that commenced or were modified upon adoption of Topic 842, Leases, or prospectively to new or modified leases.
−Removed: The Company, as lessor, does not currently have any leases that would be subject to this amendment.
+Added: The Company adopted the ASU on a prospective basis on its effective date of January 1, 2022.
+Added: At the time of adoption, the Company, as lessor, did not have any leases that would have been subject to this amendment.
Acquired Contracts with Customers
10 unchanged sentences
Early adoption is permitted with retrospective application to all business combinations that occurred during the fiscal year of early adoption.
−Removed: Business Combinations
−Removed: Digital Bridge Holdings, LLC ("DBH")
−Removed: On July 25, 2019, the Company acquired DBH in a combination of:
−Removed: (a) cash, a portion of which was deferred until the expiration of certain customary seller indemnification obligations and was paid in full in May 2020 (Note 18);
−Removed: issuance of 21,478,515 OP Units, which were measured based upon the closing price of the Company's class A common stock on July 24, 2019 of $ 5.21 per share.
−Removed: The Company acquired the fee streams but not the equity interests related to the six portfolio companies managed by DBH.
−Removed: The principals of DBH retained their equity investments, including general partner interests in existing DBH investment vehicles and in Digital Bridge Partners, LP (“DBP I,” formerly Digital Colony Partners, LP or DCP I), a fund that was previously co-sponsored by the Company and DBH.
−Removed: The Company's acquisition of DBH included the remaining 50 % equity interest held by DBH in Digital Colony Management, LLC ("DCM"), previously an equity method joint venture with DBH, which manages DBP I.
−Removed: Upon closing of the acquisition, the Company obtained a controlling interest in DCM and remeasured its existing 50 % interest at a fair value of $ 51.4 million.
−Removed: The full amount, representing the excess of fair value over carrying value of the Company's investment in DCM, was recognized in other gain on the Company's statement of operations, as the Company's carrying value of its investment in DCM prior to the business combination was nil .
−Removed: The fair value was based upon the value of 50 % of estimated future net cash flows from the DBP I management contract, discounted at 8 %.
−Removed: DataBank Colocation Data Centers
−Removed: On December 20, 2019, the Company acquired from third party investors a 20 % interest in DataBank, which operates edge colocation data centers in nine U.S.
−Removed: markets, owning eight properties, with leasehold interests in 12 properties.
−Removed: DataBank is a portfolio company managed by DBH and invested in by the principals and senior professionals of DBH.
−Removed: The Company is deemed to have a controlling interest in DataBank as control over the operations of DataBank resides substantially with the Company.
−Removed: Consideration included the payment of cash to third parties for the Company’s interests in DataBank and the issuance of 612,072 OP Units to the DBH principals, Marc Ganzi, the Company's CEO and President, and Ben Jenkins, now the chief investment officer of the Company’s digital real estate platform, for incentive units owned by the DBH principals and allocable to the Company’s acquired interests, measured based upon the closing price of the Company's class A common stock on December 20, 2019 of $ 4.84 per share.
−Removed: The OP Units were issued to the DBH principals who had previously received incentive units from DataBank, in exchange for certain of their incentive units such that the Company will not be subject to future carried interest payments to the DBH principals with respect to the Company's investment in DataBank (Note 18).
−Removed: The DBH principals otherwise retained their equity interests in DataBank.
−Removed: In January 2022, the Company and an existing investor acquired additional equity in DataBank resulting from a redemption of interests by a selling shareholder.
−Removed: The Company's share was an additional $ 32.0 million investment, which increased its ownership in DataBank to 21.9 %.
+Added: The Company early adopted the ASU on January 1, 2022 with no impact upon adoption.
+Added: Future Accounting Standards
+Added: Contractual Sale Restriction on Equity Securities
+Added: In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , which amends Topic 820 Fair Value to clarify that a contractual sale restriction that is entity-specific is not part of the unit of account of an equity security and is therefore not considered in measuring the fair value of an equity security, in which case, a discount should not be applied.
+Added: The amendment further prohibits recognizing the contractual sale restriction as a separate unit of account, that is, as a contra asset or liability.
+Added: Sale restrictions that are characteristics of the holder of an equity security include, but are not limited to, lock-up agreements, market stand-off agreements, or specific provisions in agreements between shareholders.
+Added: In contrast, a legal restriction preventing a security from being sold on a national securities exchange or an over-the-counter market is a security-specific characteristic as the restriction would similarly apply to a market participant buyer in an assumed sale of the security.
+Added: This guidance also applies to issuers of equity securities that are subject to contractual sale restrictions, for example, equity securities issued as consideration in a business combination.
+Added: The ASU requires additional disclosures related to equity securities that are subject to contractual sale restrictions, specifically (1) the fair value of such equity securities, (2) the nature and remaining duration of the restrictions, and (3) any circumstances that could cause a lapse in restrictions.
+Added: The ASU is effective January 1, 2024, with early adoption permitted in the interim periods.
+Added: Transition is prospective with any fair value adjustments resulting from adoption recognized in earnings and the amount adjusted disclosed in the period of adoption.
+Added: For subsidiaries of the Company that are investment companies as defined in ASC 946, the ASU is applied prospectively to equity securities with contractual sale restrictions entered into or modified on or after the adoption date.
+Added: For equity securities with contractual sale restrictions entered into or modified before the adoption date, the existing accounting policy continues to be applied until the restrictions expire or are modified, and if the existing accounting policy differs from the amended guidance, the additional disclosure requirements under the ASU would be applicable.
+Added: The Company and its investment company subsidiaries do not currently have equity securities subject to contractual sale restrictions.
Asset Acquisitions
1 unchanged sentence
In July 2020 and following an additional investment in October 2020, the Company, alongside fee bearing third party capital, invested $ 1.36 billion for an approximately 90 % equity interest in entities that hold Vantage Data Centers Holdings, LLC's ("Vantage") portfolio of 12 stabilized hyperscale data centers in North America and $ 2.0 billion of secured indebtedness (“Vantage SDC”).
−Removed: The remaining equity interest in Vantage SDC is held by the existing investors of Vantage, and together with the third party capital raised by the Company, represent noncontrolling interests.
−Removed: The Company's balance sheet investment is approximately $ 200 million or a 13 % equity interest in Vantage SDC.
+Added: The remaining equity interest in Vantage SDC is held by the investors of Vantage prior to the Company's acquisition, and together with the third party capital raised by the Company, represent noncontrolling interests.
+Added: The Company's balance sheet investment was approximately $ 200 million or a 13 % equity interest in Vantage SDC.
Vantage SDC is a carve-out from Vantage's data center business.
−Removed: The acquisition excluded Vantage's remaining portfolio of development-stage data centers and its employees, all of whom were retained by Vantage.
+Added: The acquisition excluded Vantage's remaining portfolio of development-stage data centers and its employees, all of which were retained by Vantage.
The day-to-day operations of Vantage SDC continue to be managed by Vantage's existing management company in exchange for management fees, and subject to certain approval rights held by the Company and the co-investors in connection with material actions.
−Removed: The Company and its co-investors have also committed to acquire the future build-out of expansion capacity, along with lease-up of the expanded capacity and existing inventory, including those associated with an add-on acquisition to the Vantage SDC portfolio described below, the costs of which will be borne by the previous owners of Vantage SDC, for estimated payments of approximately $ 350 million.
−Removed: It is anticipated that most, if not all, of the payments will be funded by Vantage SDC from borrowings under its credit facilities and/or cash from operations.
−Removed: Pursuant to this arrangement, Vantage SDC entered into 11 tenant leases in 2021 related to a portion of the expansion capacity which triggered aggregate payments of $ 100.8 million.
−Removed: As part of the July 2020 acquisition, the Company had an option to purchase an additional data center in Santa Clara, California.
−Removed: In September 2021, the Company exercised the option and purchased the data center for $ 404.5 million in cash, funded through borrowings by Vantage SDC, and a deferred amount of $ 56.9 million to be paid upon future lease-up.
+Added: Pursuant to a purchase option in connection with the July 2020 acquisition, the Company acquired an additional data center in Santa Clara, California in September 2021 for $ 404.5 million in cash.
+Added: The acquisition was funded through borrowings by Vantage SDC, with a deferred amount of $ 56.9 million to be paid upon future lease-up, and additional consideration contingent on lease-up of the remaining capacity.
+Added: In connection with the July 2020 and September 2021 acquisitions, the Company and its co-investors also committed to acquire the future build-out of expansion capacity, along with lease-up of the expanded capacity and existing inventory, the costs of which are borne by the previous owners of Vantage SDC.
+Added: As of December 31, 2022, the remaining consideration for the incremental lease-up acquisitions is estimated to be approximately $ 198 million.
+Added: Most, if not all, of the cost of the expansion capacity has been or will be funded by Vantage SDC from borrowings under its credit facilities and/or cash from operations.
+Added: Pursuant to this arrangement, Vantage SDC had 15 and 11 new tenant leases related to a portion of the expansion capacity that commenced in 2022 and 2021, respectively, for aggregate consideration of $ 161.3 million and $ 100.8 million, respectively.
All of these payments were made to the previous owners of Vantage SDC and are treated as asset acquisitions.
−Removed: zColo Colocation Data Centers
−Removed: In December 2020, the Company's DataBank subsidiary acquired zColo, the colocation business of Zayo Group Holdings, Inc.
−Removed: ("Zayo"), composed of 39 data centers in the U.S.
+Added: Acquisitions by DataBank (the Company's edge colocation data center subsidiary)
+Added: • Four colocation data centers in Houston, Texas in March 2022 for $ 678 million, funded by a combination of $ 262.5 million of debt and $ 415.5 million of equity, of which the Company's share was $ 88.7 million.
+Added: • A data center each in Atlanta, Georgia in May 2022 for $ 10.9 million, and in Denver, Colorado in February 2022 that was previously leased by its zColo subsidiary for $ 17.6 million.
+Added: • Five data centers in the zColo portfolio in France in February 2021 for $ 33.0 million.
+Added: • One building each in Colorado and New York in the third quarter of 2021 totaling $ 38.5 million, to be redeveloped into data centers.
+Added: ◦ zColo, the colocation business of Zayo Group Holdings, Inc.
+Added: ("Zayo") in December 2020, composed of 39 data centers in the U.S.
and the U.K., for approximately $ 1.2 billion through a combination of debt and equity financing, including $ 0.5 billion of third party co-invest capital raised by the Company.
−Removed: The Company's balance sheet investment is $ 145 million ($ 188 million at the time of closing), which maintained the Company's 20 % equity interest in DataBank.
−Removed: Acquisition of zColo's remaining five data centers in France for $ 33.0 million closed in February 2021.
−Removed: Zayo is an anchor tenant within the zColo facilities and is a significant customer of DataBank.
−Removed: Acquisitions by DataBank
−Removed: In the third quarter of 2021, DataBank and its zColo subsidiary each acquired a building in the U.S.
−Removed: for a combined $ 38.5 million, to be redeveloped into data centers.
+Added: The Company's balance sheet investment was then $ 145 million.
+Added: Zayo is an anchor tenant within the zColo facilities and is a significant customer of DataBank.data centers
+Added: In June 2022, the Company acquired the mobile telecommunications tower business (“TowerCo”) of Telenet Group Holding NV (Euronext Brussels:
+Added: TNET) for € 740.1 million or $ 791.3 million (including transaction costs) .
+Added: 2022, our interest in the temporarily warehoused TowerCo investment was transferred to the Company's new sponsored fund (Note 16) and TowerCo was deconsolidated.
+Added: The TowerCo assets acquired had included owned tower sites, tower sites subject to third party leases that gave rise to right-of-use lease assets and corresponding lease liabilities, equipment, as well as customer relationships related primarily to a master lease agreement with Telenet as lessee.
+Added: The acquisition had been funded through $ 326.1 million of debt, $ 278.1 million of equity from the Company, and $ 213.8 million in third party equity.
+Added: In addition to the purchase price, the funds had been used to finance transaction costs, debt issuance costs, working capital and as operating cash.
+Added: Prior to transfer, TowerCo was presented within Corporate and Other.
Allocation of Consideration Transferred
The following table summarizes the consideration and allocation to assets acquired, liabilities assumed and noncontrolling interests at acquisition.
−Removed: Consideration for asset acquisitions incorporates capitalized transaction costs, which may include incentive payments to employees for successful closing of the acquisitions.
−Removed: Asset Acquisitions Business Combinations
−Removed: 2021 2020 2019
−Removed: (In thousands) Vantage SDC Expansion Capacity and Add-On Acquisition Acquisitions by DataBank / zColo US zColo France Vantage SDC zColo US and UK DBH DataBank (1)
−Removed: Consideration
−Removed: Cash $ 505,301 $ 38,500 $ 33,018 $ 1,524,610 $ 1,181,488 $ 181,167 $ 182,731
−Removed: Deferred consideration — — — — — 35,500 —
−Removed: OP Units issued — — — — — 111,903 2,962
−Removed: Total consideration for equity interest acquired $ 505,301 $ 38,500 $ 33,018 $ 1,524,610 $ 1,181,488 $ 328,570 $ 185,693
−Removed: Fair value of equity interest in Digital Colony Manager — — — — — 51,400 —
+Added: In an asset acquisition, the cost of assets acquired, which includes capitalized transaction costs, is allocated to individual assets within the group based on their relative fair values and does not give rise to goodwill.
+Added: Asset Acquisitions
2022 2021 2020
+Added: (In thousands) TowerCo Acquisitions by DataBank / zColo US Vantage SDC Expansion Capacity Vantage SDC Expansion Capacity and Add-On Acquisition Acquisitions by DataBank / zColo US zColo France Vantage SDC zColo US and UK
Assets acquired and liabilities assumed
1 unchanged sentence
Real estate 363,121 627,474 140,140 479,587 38,500 26,083 2,720,870 882,327
−Removed: Assets held for disposition — — — — — — 29,266
Intangible assets 673,218 77,885 21,162 82,603 — 8,702 765,137 303,119
−Removed: Lease right-of-use ("ROU") and other assets — — 9,536 181,260 415,038 13,008 108,896
+Added: ROU and other assets 234,462 3,994 — — — 9,536 181,260 415,038
Debt — — — — — — ( 2,060,307 ) —
−Removed: Tax liabilities — — — — — ( 17,392 ) ( 100,759 )
+Added: Deferred tax liabilities ( 243,223 ) — — — — — — —
Intangible, lease and other liabilities ( 236,324 ) ( 2,839 ) — ( 56,889 ) — ( 11,303 ) ( 82,350 ) ( 419,262 )
Fair value of net assets acquired $ 791,254 $ 706,514 $ 161,302 $ 505,301 $ 38,500 $ 33,018 $ 1,524,610 $ 1,181,488
−Removed: Noncontrolling interests in investment entities — — — — — — ( 724,567 )
−Removed: Goodwill $ — $ — $ — $ — $ — $ 247,248 $ 463,120
−Removed: (1) In 2020, adjustments were made to the purchase price allocation of DataBank during its one year measurement period based upon information obtained about facts and circumstances that existed at the time of closing.
−Removed: This includes an $ 8.8 million decrease to deferred tax liabilities in the fourth quarter of 2020 based upon the final 2019 tax provision for DataBank.
• Real estate was valued based upon (i) current replacement cost for buildings in an as-vacant state and improvements, estimated using construction cost guidelines;
(ii) current replacement cost for data center infrastructure by applying an estimated cost per kilowatt based upon current capacity of each location and also considering the associated indirect costs such as design, engineering, construction and installation;
−Removed: (iii) recent comparable sales or current listings for land;
−Removed: and (iv) contracted price net of estimated selling costs for real estate held for disposition.
−Removed: Useful lives of real estate acquired range from 25 to 50 years for buildings and improvements,
−Removed: 5 to 21 years for site improvements, 10 to 20 years for data center infrastructure, and 1 to 5 years for furniture, fixtures and equipment.
+Added: (iii) current replacement cost for towers in consideration of their remaining economic life;
+Added: and (iv) recent comparable sales or current listings for land.
+Added: Useful lives of real estate acquired range from 30 to 50 years for buildings and improvements, 5 to 40 years for site improvements, 11 to 71 years for towers and related equipment, 11 to 20 years for data center infrastructure, and 1 to 5 years for furniture, fixtures and equipment.
• Lease-related intangibles for real estate acquisitions were composed of the following:
−Removed: • In-place leases reflect the value of rental income forgone if the properties had been acquired vacant, and the leasing commissions, legal and marketing costs that would have been incurred to lease up the properties, with remaining lease terms ranging between 1 and 15 years.
+Added: • In-place leases reflect the value of rental income forgone if the properties had been acquired vacant, and the leasing commissions, legal and marketing costs that would have been incurred to lease up the properties, discounted at rates between 4.75 % and 6.8 %, with remaining lease terms ranging between 1 and 15 years.
• Above- and below-market leases represent the rent differential for the remaining lease term between contractual rents of acquired leases and market rents at the time of acquisition, discounted at rates between 6.0 % and 11.25 % with remaining lease terms ranging between 1 and 15 years.
• Tenant relationships represent the estimated net cash flows attributable to the likelihood of lease renewal by an existing tenant relative to the cost of obtaining a new lease, taking into consideration the estimated time it would require to execute a new lease or backfill a vacant space, discounted at rates between 4.75 % and 11.5 %, with estimated useful lives between 5 and 15 years.
−Removed: • The investment management intangible assets of DBH were composed of the following:
−Removed: • Management contracts are valued based upon estimated net cash flows generated from the contracts, including the Company's 50 % interest in Digital Colony Manager, discounted at 8 %, with remaining term of the contracts ranging between 3 and 10 years.
−Removed: • Investor relationships—represent the fair value of potential investment management fees, net of operating costs, to be generated from repeat DBH investors in future sponsored vehicles, discounted at 11.5 %, and potential carried interest discounted at 25 %, with estimated useful life of 10 years.
+Added: • Customer service contracts were valued based upon estimated net cash flows generated from the zColo customer service contracts that would have been forgone if such contracts were not in place, taking into consideration the time it would require to execute a new contract, with remaining term of the contracts ranging between 1 and 15 years.
+Added: • Customer relationships for zColo were valued as the incremental net cash flows to business attributable to the in-place customer relationships, discounted at a rate of 10 %, with an estimated useful life of 12 years.
+Added: • Customer relationships for towers were valued as the estimated future cash flows to be generated over the life of the tenant relationships based upon rental rates, operating costs, expected renewal terms and attrition, discounted at 6.8 %, with estimated useful lives between 19 and 45 years.
• Other intangible assets acquired were as follows:
−Removed: • Customer service contracts were valued based upon estimated net cash flows generated from the Databank and zColo customer service contracts that would have been forgone if such contracts were not in place, taking into consideration the time it would require to execute a new contract, with remaining term of the contracts ranging between 1 and 15 years.
−Removed: • Customer relationships were valued as the incremental net cash flows to the DataBank and zColo businesses attributable to the in-place customer relationships, discounted at 9.5 % and 10 %, respectively, with estimated useful life of 12 years.
−Removed: • Trade names of Digital Bridge, DataBank and zColo were valued based upon estimated savings from avoided royalty at a rate of 1 % or 2 %, discounted at rates between 9.5 % and 11.5 %, with useful lives between 1 and 10 years.
+Added: • Trade name of zColo was valued based upon estimated savings from avoided royalty at a rate of 1 %, discounted at 10 %, with a 1 year useful life.
• Assembled workforce was valued based upon estimated cost of recruiting and training new data center employees for zColo, with a 3 year useful life.
−Removed: • Other assets acquired and liabilities assumed include primarily lease ROU assets associated with leasehold data centers and corresponding lease liabilities.
−Removed: Lease liabilities were measured based upon the present value of future lease payments over the lease term, discounted at the incremental borrowing rate of the respective acquirees.
−Removed: Deferred tax liabilities recognized upon acquisition represent the tax effect on book-to-tax basis difference, associated with DataBank real estate assets and DBH management contract intangibles.
−Removed: • Assumed debt was valued based upon market rates and spreads that prevailed at the time of acquisition for debt with similar terms and remaining maturities.
−Removed: • Noncontrolling interests in investment entities were valued based upon their proportionate share of the respective net assets at fair value.
−Removed: • In a business combination, the excess of the fair value of consideration transferred over the fair value of identifiable assets acquired, liabilities assumed and noncontrolling interests, is recorded as goodwill.
−Removed: The DBH and DataBank goodwill are each assigned to the Digital IM and Digital Operating segments, respectively.
−Removed: The DBH acquisition is a strategic transaction that is expected to generate meaningful accretion in value to the Company through expansion of the digital investment management platform by combining the industry sector knowledge, experience and relationships from the DBH team with the capital raising resources of the Company, as represented by the value of the DBH goodwill.
−Removed: The DataBank goodwill represents the value embodied in the potential for future customers, revenue and profit growth in the colocation business, and industry knowledge, experience and relationships contributed by the DataBank management team.
−Removed: In an asset acquisition, the cost of the assets acquired and liabilities assumed is allocated based upon their relative fair value and does not give rise to goodwill.
−Removed: The following table summarizes the Company's real estate held for investment in the digital operating segment.
−Removed: Real estate held for disposition is presented in Note 11.
+Added: • Deferred tax liabilities were recognized for the book-to-tax basis difference associated with the TowerCo acquisition.
+Added: • Debt assumed from the Vantage SDC acquisition in 2020 was valued based upon market rates and spreads that prevailed at the time of acquisition for debt with similar terms and remaining maturities.
+Added: • Other assets acquired and liabilities assumed include primarily lease ROU assets associated with leasehold data centers and ground space hosting tower communication sites, along with corresponding lease liabilities.
+Added: Lease liabilities were measured based upon the present value of future lease payments over the lease term, discounted at the incremental borrowing rate of the respective acquiree entities.
+Added: Other liabilities in 2021 also included a deferred purchase consideration associated with the Vantage SDC add-on acquisition.
+Added: Business Combination in 2023
+Added: Infrastructure Investment Management Platform
+Added: In February 2023, the Company completed its previously announced acquisition of the global infrastructure equity investment management business of AMP Capital Investors International Holdings Limited ("AMP Capital"), which was rebranded as InfraBridge at closing.
+Added: Consideration for the acquisition consisted of:
+Added: (i) an upfront amount of $ 316 million (or $ 323.5 million including working capital, net of cash assumed), subject to customary post-closing adjustments up to 90 days after closing;
+Added: and (ii) a contingent amount of up to A$ 180 million (approximately $ 129 million), generally based upon achievement of future fundraising targets for InfraBridge's new global infrastructure funds.
+Added: The following table summarizes the Company's real estate held for investment.
(In thousands) December 31, 2022 December 31, 2021
7 unchanged sentences
Real Estate Depreciation
−Removed: Depreciation of real estate held for investment was $ 275.8 million in 2021 and $ 117.1 million in 2020.
−Removed: Depreciation was immaterial in 2019 as the Company's first digital operating real estate portfolio was acquired in late December 2019.
+Added: Depreciation of real estate held for investment was $ 350.7 million, $ 275.8 million and $ 117.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Property Operating Income
−Removed: Components of property operating income in the digital operating segment are as follows.
−Removed: This excludes amounts related to discontinued operations (Note 12).
+Added: Components of property operating income are as follows.
Year Ended December 31,
8 unchanged sentences
$ 927,506 $ 762,750 $ 312,928
−Removed: In 2021, property operating income from a single customer accounted for approximately 16.7 % of the Company's total revenues from continuing operations, or approximately 7.8 % of the Company's share of total revenues from continuing operations, net of amounts attributable to noncontrolling interests in investment entities.
−Removed: There was no similar tenant concentration in 2020 and 2019.
+Added: For the years ended December 31, 2022 and 2021, property operating income from a single customer accounted for approximately 18 % and 17 %, respectively, of the Company's total revenues from continuing operations, or approximately 8 % for both periods, of the Company's share of total revenues from continuing operations, net of amounts attributable to noncontrolling interests in investment entities.
+Added: There was no similar tenant concentration in 2020.
Future Fixed Lease Income
−Removed: At December 31, 2021, future fixed lease payments receivable under noncancelable operating leases for real estate held for investment in the digital operating segment were as follows.
+Added: At December 31, 2022, future fixed lease payments receivable under noncancelable operating leases for real estate held for investment in the Operating segment were as follows.
These operating leases have expiration dates through 2041, excluding month-to-month leases, and renewal options and early termination rights at the lessee's election unless such options or rights are reasonably certain to be exercised.
3 unchanged sentences
Total $ 3,425,556
−Removed: Purchase Commitments
−Removed: In January 2022, the Company's subsidiary, DataBank, entered into a definitive agreement to acquire four colocation data centers in Houston, Texas for $ 670 million, which will add approximately 308,000 built square feet to its portfolio.
−Removed: Based upon the expected equity funding by DataBank, the Company's share of the investment is anticipated to be $ 91.4 million, following which the Company's interest in DataBank will approximate 21.8 % ( 21.9 % in January 2022 preceding this transaction, refer to Note 3).
−Removed: The transaction is expected to close in March 2022, subject to customary closing conditions and regulatory approval.
−Removed: Equity Investments
−Removed: The Company's equity investments, excluding investments held for disposition (Note 11), are represented by the following:
+Added: Equity and Debt Investments
+Added: The Company's equity and debt investments, excluding investments held for disposition (Note 21), are represented by the following:
(In thousands) December 31, 2022 December 31, 2021
+Added: Equity investments
Equity method investments
+Added: BrightSpire Capital, Inc.
$ 217,994 $ 284,985
−Removed: Company-sponsored private funds (2)
+Added: Company-sponsored private funds—equity investment in funds
406,624 270,737
−Removed: Investments under fair value option (Note 13)
+Added: Company-sponsored private funds—unrealized carried interest
+Added: 341,749 111,957
Other 3,887 5,417
5 unchanged sentences
Other 108,567 10,570
−Removed: $ 935,153 $ 792,996
−Removed: (1) Excludes approximately 461,000 shares and 3.1 million units in BRSP held by NRF Holdco that are included in assets held for disposition (Note 11), of the Company's aggregate holdings of 38.5 million shares and units in BRSP at December 31, 2021 ( 47.9 million at December 31, 2020).
−Removed: (2) Includes unrealized carried interest of approximately $ 112.0 million at December 31, 2021 and $ 12.7 million at December 31, 2020 in connection with sponsored investment vehicles that are in the early stage of their lifecycle, of which a substantial portion is shared with certain employees.
+Added: Total equity investments 1,271,123 935,153
+Added: Debt securities
+Added: CLO subordinated notes 50,927 —
+Added: Equity and debt investments $ 1,322,050 $ 935,153
+Added: (1) At December 31, 2021, excluded approximately 461,000 shares and 3.1 million units in BRSP held by NRF Holdco that were included in assets held for disposition (Note 21).
+Added: NRF Holdco was sold in February 2022.
+Added: Equity Investments
The Company's equity investments represent noncontrolling equity interests in various entities, primarily BRSP, interests in the Company's sponsored digital investment vehicles, and marketable securities held largely by private open-end liquid funds sponsored and consolidated by the Company.
1 unchanged sentence
The Company is not required to provide financial or other support in excess of its capital commitments, where applicable, and its exposure is limited to its investment balance.
−Removed: The Company evaluates its equity method investments for other-than-temporary impairment ("OTTI") at each reporting period.
−Removed: Other than BRSP, OTTI was recorded only on equity method investments held for disposition, as discussed in Note 11.
−Removed: The Company owned a 29 % interest in BRSP at December 31, 2021 ( 36.4 % at December 31, 2020), accounted for under the equity method as it exercises significant influence over BRSP's operating and financial policies through its substantial ownership interest.
−Removed: The following discussion encompasses all of the Company's interest in BRSP.
−Removed: This includes the Company's interest in BRSP held by NRF Holdco that is presented as held for disposition and discontinued operations, and was subsequently disposed in February 2022.
−Removed: Disposition —In August 2021, the Company sold 9,487,500 BRSP shares through a secondary offering by BRSP for net proceeds of approximately $ 81.8 million, after underwriting discounts.
−Removed: A net gain was recognized in equity method earnings within continuing operations of $ 7.6 million (including a proportion of basis difference associated with the BRSP shares disposed, as discussed below).
−Removed: OTTI —The Company determined there was no OTTI on its investment in BRSP in 2021.
−Removed: At December 31, 2021, the fair value of the Company's investment in BRSP, based upon its closing stock price of $ 10.26 per share, was in excess of its carrying value.
−Removed: In the second quarters of 2020 and 2019, the Company had determined that its investment in BRSP was other-than-temporarily impaired and recorded impairment charges, included in equity method losses, of $ 274.7 million and $ 227.9 million, respectively, measured as the excess of carrying value of its investment in BRSP over market value based upon BRSP's closing stock price on June 30, 2020 and June 30, 2019, respectively.
−Removed: Basis Difference —The impairment charges recorded by the Company on its investment in BRSP in 2020 and 2019 resulted in a basis difference between the Company's carrying value of its investment in BRSP (based upon BRSP's share price at the time of impairment) and the Company's proportionate share of BRSP's book value of equity at the time of impairment.
+Added: The Company evaluates its equity method investments for OTTI at each reporting period.
+Added: In 2021, OTTI was recorded only on equity method investments held for disposition, as discussed in Note 21.
+Added: BrightSpire Capital, Inc.
+Added: At December 31, 2022, the Company owned approximately 35.0 million shares in BRSP for a 27.1 % interest in BRSP ( 29.0 % at December 31, 2021, including BRSP shares and units held by NRF Holdco that were disposed in February 2022), accounted for under the equity method as it exercises significant influence over BRSP's operating and financial policies through its substantial ownership interest.
+Added: In connection with the internalization of BRSP in April 2021, the Company had entered into a stockholders agreement with BRSP, pursuant to which the Company agreed, for so long as the Company owns at least 10 % of BRSP's outstanding common shares, to vote in BRSP director elections as recommended by BRSP’s board of directors at any stockholders' meeting that occurs prior to BRSP's 2023 annual stockholders' meeting.
+Added: In addition, the Company is subject to customary standstill restrictions, including an obligation not to initiate or make stockholder proposals, nominate directors or participate in proxy solicitations, until the beginning of the advance notice window for BRSP's 2023 annual meeting.
+Added: Except as aforementioned, the Company may vote its shares in its sole discretion in any votes of BRSP’s stockholders and is prohibited from acquiring additional BRSP shares.
+Added: Disposition —In 2022 and 2020, there were no dispositions of the Company's BRSP shares.
+Added: In August 2021, the Company sold 9,487,500 BRSP shares through a secondary offering by BRSP for net proceeds of approximately $ 81.8 million, after underwriting discounts.
+Added: A net gain was recognized in equity method earnings within continuing operations of $ 7.6 million (including basis difference associated with the BRSP shares disposed, as discussed below).
+Added: OTTI —In the third and fourth quarters of 2022 and second quarter of 2020, the Company determined that its investment in BRSP was other-than-temporarily impaired and recorded impairment charges, included in equity method losses, of $ 60.4 million in 2022 and $ 274.7 million in 2020.
+Added: In 2022, the Company determined that given the continuing market volatility, its anticipated hold period for its investment in BRSP may not be sufficient to allow for a recovery of BRSP's stock price relative to the Company's carrying value of its investment in BRSP.
+Added: In 2020, concerns over the likelihood of a near term recovery of BRSP's stock price stemmed from then uncertainties surrounding the pandemic and its effect on the economy and equity markets.
+Added: The OTTI charge was measured as the excess of carrying value over market value of the Company's investment in BRSP based upon BRSP's closing stock price on December 30, 2022, the last trading day of the quarter, and on June 30, 2020, respectively.
+Added: There was no OTTI in 2021 as the fair value of the Company's investment in BRSP was in excess of its carrying value.
+Added: As a result of the impairment charge, the carrying value of the Company's investment in BRSP as of December 31, 2022 represents a non-recurring fair value that was measured under the Level 1 fair value hierarchy.
+Added: Basis Difference —The Company recorded impairment charges on its investment in BRSP in 2022, 2020 and 2019, with each instance resulting in a basis difference between the Company's carrying value of its investment in BRSP (based upon BRSP's share price at the time of impairment) and the Company's proportionate share of BRSP's book value of equity at the time of impairment.
The impairment charges were applied to the Company's investment in BRSP as a whole and were not determined based upon an impairment assessment of individual assets held by BRSP.
2 unchanged sentences
Upon resolution of these investments by BRSP or upon the Company's disposition of its shares in BRSP, the basis difference related to resolved investments or the proportion of basis difference associated with the BRSP shares disposed is applied to calculate the Company's share of net gain or loss resulting from such resolution or disposition.
−Removed: The Company increased its share of net earnings or reduced its share of net losses from BRSP by $ 110.3 million, $ 83.9 million and $ 141.1 million for the years ended December 31, 2021, 2020 and 2019 , respectively, representing the basis difference allocated to investments that were resolved or impaired by BRSP during these periods and the basis difference proportionate to the Company's ownership in BRSP that was disposed in August 2021.
−Removed: The remaining basis difference at December 31, 2021 was $ 167.3 million.
+Added: The Company increased its share of net earnings or reduced its share of net losses from BRSP by $ 17.0 million in 2022, $ 110.3 million in 2021 and $ 83.9 million in 2020, representing the basis difference allocated to investments that were resolved or impaired by BRSP during these periods.
+Added: The basis difference balance at December 31, 2022 was $ 210.7 million.
+Added: Carried Interest
+Added: The carried interest on balance sheet date represents unrealized carried interest in connection with sponsored funds that are currently in the early stage of their lifecycle.
+Added: Unrealized carried interest may be subject to reversal until such time it is realized.
+Added: Carried interest allocation is presented gross of accrued carried interest compensation (Note 7).
+Added: Carried Interest Distributed
+Added: In the second half of 2022, $ 152.5 million of carried interest was distributed and recognized in equity method earnings.
+Added: $ 119.8 million of the distributed carried interest was allocated to current and former employees and to Wafra (Note 10), recorded as carried interest compensation and amounts attributable to noncontrolling interests (Note 16).
+Added: Clawback Obligation
+Added: Carried interest distributions may be subject to clawback if decline in investment values results in cumulative performance of the fund falling below minimum return hurdles in the interim period.
+Added: At December 31, 2022, the Company does not have a liability for clawback obligations on distributed carried interest.
+Added: With respect to funds that have distributed carried interest, if in the event all of their investments are deemed to have no value, the likelihood of which is remote, carried interest distributions of $ 75.1 million would be subject to clawback as of December 31, 2022, of which $ 58.4 million would be the responsibility of the employee and former employee recipients.
+Added: For this purpose, a portion of the carried interest allocated is generally held back from these recipients at the time of distribution.
Combined Financial Information of Equity Method Investees
16 unchanged sentences
Sponsored Funds
−Removed: At December 31, 2021, the Company had unfunded commitments of $ 88.8 million to the Company's sponsored funds in its flagship digital opportunistic strategy, DBP I and Digital Bridge Partners II, LP ("DBP II," formerly Digital Colony Partners II, LP or DCP II).
+Added: At December 31, 2022, the Company had unfunded commitments to its sponsored funds of $ 112.2 million, including commitments to a consolidated fund.
Loans Receivable
−Removed: DataBank— The Company's DataBank subsidiary has a lending commitment to a borrower, the funding of which is contingent on the borrower meeting certain criteria such as agreed upon benchmarks, financial and operating metrics and approved budgets.
−Removed: At December 31, 2021, the unfunded lending commitment was $ 25.0 million, of which the Company's share was $ 5.0 million, net of amounts attributable to noncontrolling interests in investment entities.
−Removed: Warehoused Loans— At December 31, 2021, the Company had unsettled trades on $ 91.1 million of loans receivable that are warehoused for a future securitization vehicle, of which up to 75 % will be funded through a credit facility that is earmarked to finance the acquisition of such loans.
+Added: The Company's DataBank subsidiary has lending commitments to a borrower, which is available to be drawn subject to satisfaction by the borrower of certain financial and operating metrics and an agreed upon budget.
+Added: At December 31, 2022, the unfunded lending commitments was $ 24.2 million, of which the Company's share was $ 2.7 million, net of amounts attributable to noncontrolling interests in investment entities.
+Added: At December 31, 2022, the borrower has not met the required criteria for further funding.
+Added: Debt Securities
+Added: In the third quarter of 2022, bank syndicated loans that the Company previously warehoused were transferred into a third party warehouse entity at their acquisition price totaling $ 232.7 million, and securitized through the issuance of collateralized loan obligation ("CLO") securities.
+Added: The corresponding warehouse facility of $ 172.5 million was repaid by the Company.
+Added: The CLO is sponsored and managed by the third party.
+Added: The Company acquired all of the subordinated notes of the CLO, which are classified as AFS debt securities.
+Added: The CLO has a stated legal final maturity of 2035.
+Added: The balance of the CLO subordinated notes is summarized as follows:
+Added: Amortized Cost without Allowance for Credit Loss
+Added: Allowance for Credit Loss Gross Cumulative Unrealized
+Added: (in thousands) Gains Losses Fair Value
+Added: December 31, 2022 $ 50,927 $ — $ — $ — $ 50,927
Goodwill, Deferred Leasing Costs and Other Intangibles
1 unchanged sentence
(In thousands)
−Removed: Digital Investment Management (1)
−Removed: Digital Operating 463,120
+Added: Investment Management (1)
+Added: Operating 463,120
Total goodwill $ 761,368
−Removed: (1) Goodwill of $ 133.0 million is deductible for income tax purposes.
−Removed: The Company determined that there were no indicators of impairment to goodwill in the digital reportable segments in 2021 and 2020.
+Added: (1) Remaining goodwill deductible for income tax purposes was $ 122.4 million at December 31, 2022 and $ 133.0 million at December 31, 2021.
Deferred Leasing Costs, Other Intangible Assets and Intangible Liabilities
24 unchanged sentences
(3) Composed of investment management contracts and investor relationships.
−Removed: (4) In connection with data center services provided in the colocation data center business.
+Added: (4) In connection with tower assets and data center services provided in the colocation data center business.
(5) Represents primarily the value of an acquired domain name and assembled workforce in an asset acquisition.
Impairment of Identifiable Intangible Assets
−Removed: In 2020, an investment management contract was written down by $ 3.8 million to a fair value of $ 4.0 million at the time of impairment.
−Removed: Fair value was based upon the revised future net cash flows over the remaining life of the contract, and represents fair value using Level 3 inputs.
−Removed: In 2021 and 2019, impairment was recorded only on identifiable intangible assets held for disposition, as discussed in Note 11.
+Added: There was no impairment on identifiable intangible assets in 2022.
+Added: In 2021, impairment was recorded only on identifiable intangible assets held for disposition (Note 21).
+Added: In 2020, an investment management contract was written down by $ 3.8 million to a fair value of $ 4.0 million at the time of impairment, classified as Level 3 and determined based upon the revised future net cash flows over the remaining life of the contract.
Amortization of Intangible Assets and Liabilities
−Removed: The following table summarizes amortization of deferred leasing costs and finite-lived intangible assets and intangible liabilities, excluding amounts related to discontinued operations (Note 12):
+Added: The following table summarizes amortization of deferred leasing costs and finite-lived intangible assets and intangible liabilities:
Year Ended December 31,
(In thousands) 2022 2021 2020
−Removed: Net decrease to rental income (1)
+Added: Net increase (decrease) to rental income (1)
$ 273 $ ( 2,471 ) $ ( 1,989 )
20 unchanged sentences
Prefunded capital expenditures for Vantage SDC — 24,293
−Removed: Deferred financing costs, net (1)
Derivative assets 11,793 944
2 unchanged sentences
Operating lease right-of-use asset, net 329,449 349,509
−Removed: 349,509 363,829
Finance lease right-of-use asset, net 120,261 131,909
6 unchanged sentences
Total other assets $ 654,050 $ 740,395
−Removed: (1) Deferred financing costs relate to revolving credit arrangements originated by the Company and its subsidiaries.
−Removed: The Company's corporate credit facility was terminated in July 2021.
−Removed: (2) Net of impairment of $ 9.4 million at December 31, 2020 for corporate office leases as the Company determined there is a reduced need for office space based upon the Company's current operations and had abandoned certain leased spaces.
−Removed: (3) Includes primarily receivables from tenants and is presented net of immaterial allowance for doubtful accounts, where applicable.
−Removed: (4) Net of accumulated depreciation of $ 19.2 million in 2021 and $ 13.5 million in 2020.
+Added: (1) Includes primarily receivables from tenants.
+Added: (2) Net of accumulated depreciation of $ 17.9 million at December 31, 2022 and $ 19.2 million at December 31, 2021 .
Accrued and Other Liabilities
4 unchanged sentences
Interest payable 10,055 14,870
−Removed: Derivative liabilities — 103,772
−Removed: Current and deferred income tax liability (Note 19)
+Added: Dividends payable 16,491 15,759
+Added: Securities sold short—consolidated funds
+Added: 40,928 37,970
+Added: Current and deferred income tax liability
+Added: Contingent consideration payable (Note 10)
+Added: Warrants issued to Wafra (Note 10)
Operating lease liability 322,930 342,510
1 unchanged sentence
Accrued compensation 52,031 64,100
−Removed: Accrued carried interest and incentive fee compensation 67,258 1,907
+Added: Accrued incentive fee and carried interest compensation 171,086 67,258
Accrued real estate and other taxes 21,580 10,523
Payable for Vantage SDC expansion capacity (Note 3)
+Added: 56,889 55,896
Accounts payable and accrued expenses 185,900 121,931
4 unchanged sentences
Deferred investment management fees of $ 6.3 million at December 31, 2022 and $ 6.0 million at December 31, 2021 are expected to be recognized as fee income over a weighted average period of 2.9 years and 3.2 years, respectively.
+Added: Deferred investment management fees recognized as income of $ 3.4 million and $ 0.4 million in the years ended December 31, 2022 and 2021 , respectively, pertain to the deferred management fee balance at the beginning of each respective period.
The Company's debt balance is composed of the following components, excluding debt related to assets held for disposition that is expected to be assumed by the counterparty upon disposition, which is included in liabilities related to assets held for disposition (Note 21).
22 unchanged sentences
Secured Fund Fee Revenue Notes (3)
−Removed: $ 300,000 3.93 % 4.7 $ — N/A N/A $ 300,000 3.93 % 4.7
−Removed: Convertible and exchangeable senior notes (4)
−Removed: 338,739 5.31 % 2.2 — N/A N/A 338,739 5.31 % 2.2
+Added: $ 300,000 3.93 % 3.7 $ — NA 3.7 $ 300,000 3.93 % 3.7
+Added: Convertible and exchangeable senior notes 278,422 5.21 % 0.9 — NA NA 278,422 5.21 % 0.9
578,422 — 578,422
Investment-Level Secured Debt
−Removed: Digital Operating 3,646,466 2.44 % 4.1 571,017 5.74 % 4.0 4,217,483 2.88 % 4.1
−Removed: Other — N/A N/A 66,500 1.31 % 1.6 66,500 1.31 % 1.6
+Added: Operating segment 3,640,235 2.43 % 3.1 993,500 8.41 % 2.6 4,633,735 3.71 % 3.0
+Added: Other — NA NA 500 5.96 % 1.6 500 5.96 % 1.6
3,640,235 994,000 4,634,235
1 unchanged sentence
December 31, 2021
+Added: Secured Fund Fee Revenue Notes (3)
+Added: $ 300,000 3.93 % 4.7 $ — NA 4.7 $ 300,000 3.93 % 4.7
Convertible and exchangeable senior notes (4)
−Removed: $ 531,502 5.36 % 3.4 $ — N/A N/A $ 531,502 5.36 % 3.4
−Removed: Secured debt (5)
−Removed: 32,815 5.02 % — — N/A N/A 32,815 5.02 % —
+Added: 338,739 5.31 % 2.2 — NA NA 338,739 5.31 % 2.2
638,739 — 638,739
Investment-Level Secured Debt
−Removed: Digital Operating 2,132,852 2.54 % 4.8 1,093,991 5.92 % 4.4 3,226,843 3.69 % 4.7
−Removed: Other — N/A N/A 164,472 3.85 % 0.1 164,472 3.85 % 0.1
+Added: Operating segment 3,646,466 2.44 % 4.1 571,017 5.74 % 4.0 4,217,483 2.88 % 4.1
+Added: Other — NA NA 66,500 1.31 % 1.6 66,500 1.31 % 1.6
3,646,466 637,517 4,283,983
6 unchanged sentences
DBRG and the OP are not guarantors to the debt.
−Removed: (4) Excludes the 5.375 % exchangeable senior notes issued by NRF Holdco as they are classified as held for disposition (Note 11).
−Removed: (5) The fixed rate recourse debt was secured by the Company's aircraft and was repaid in January 2021 upon sale of the aircraft.
−Removed: Corporate Credit Facility
−Removed: In July 2021, the Company repaid the outstanding balance and terminated its corporate credit facility, which was replaced with the Company's new securitized financing facility, as discussed below.
−Removed: Prior to termination, the credit facility provided revolving commitments of $ 300 million based upon terms amended in May 2021 ($ 450 million at December 31, 2020), with the maximum amount available to be drawn limited by a borrowing base of certain investment assets, generally valued based upon a percentage of adjusted net book value or a multiple of base management fee EBITDA (as defined in the credit agreement).
−Removed: Advances under the credit facility accrued interest at a per annum rate equal to, at the Company’s election, either the 1-month London Interbank Offered Rate ("LIBOR") plus a margin of 2.75 %, or a base rate determined according to a prime rate or federal funds rate plus a margin of 1.75 %.
−Removed: Unused commitments under the credit facility were subject to a commitment fee of 0.35 % per annum.
+Added: (4) Excludes the 5.375 % exchangeable senior notes issued by NRF Holdco that were classified as held for disposition (Note 21) and subsequently assumed by the acquirer in February 2022.
Securitized Financing Facility
−Removed: In July 2021, special-purpose subsidiaries of the OP (the "Co-Issuers") issued $ 500 million aggregate principal amount of Series 2021-1 Secured Fund Fee Revenue Notes, composed of:
+Added: In July 2021, special-purpose subsidiaries of the OP (the "Co-Issuers") issued Series 2021-1 Secured Fund Fee Revenue Notes, composed of:
(i) $ 300 million aggregate principal amount of 3.933 % Secured Fund Fee Revenue Notes, Series 2021-1, Class A-2 (the “Class A-2 Notes”);
−Removed: and (ii) up to $ 200 million Secured Fund Fee Revenue Variable Funding Notes, Series 2021-1, Class A-1 (the “VFN Notes” and, together with the Class A-2 Notes, the “Series 2021-1 Notes”).
−Removed: The VFN Notes allow the Co-Issuers to borrow on a revolving basis.
−Removed: The Series 2021-1 Notes were issued under an Indenture that allows the Co-Issuers to issue additional series of notes in the future, subject to certain conditions.
+Added: and (ii) up to $ 300 million (following a $ 100 million increase in April 2022) Secured Fund Fee Revenue Variable Funding Notes, Series 2021-1, Class A-1 (the “VFN” and, together with the Class A-2 Notes, the “Series 2021-1 Notes”).
+Added: The VFN allow the Co-Issuers to borrow on a revolving basis.
+Added: The Series 2021-1 Notes were issued under an Indenture dated July 2021, as amended in April 2022, that allows the Co-Issuers to issue additional series of notes in the future, subject to certain conditions.
+Added: The Series 2021-1 Notes had replaced the Company's previous corporate credit facility.
The Series 2021-1 Notes represent obligations of the Co-Issuers and certain other special-purpose subsidiaries of DBRG, and neither DBRG, the OP nor any of its other subsidiaries are liable for the obligations of the Co-Issuers.
1 unchanged sentence
The Class A-2 Notes bear interest at a rate of 3.933 % per annum, payable quarterly.
−Removed: The VFN Notes bear interest generally based upon 3-month LIBOR (or an alternate benchmark as set forth in the purchase agreement of the VFN Notes) plus 3 %.
−Removed: Unused amounts under the VFN Notes facility is subject to a commitment fee of 0.5 % per annum.
+Added: The VFN bear interest generally based upon 1-month Adjusted Term Secured Overnight Financing Rate or SOFR (prior to April 2022, 3-month LIBOR) or
+Added: an alternate benchmark as set forth in the purchase agreement of the VFN plus 3 %.
+Added: Unused amounts under the VFN facility is subject to a commitment fee of 0.5 % per annum.
The final maturity date of the Class A-2 Notes is in September 2051, with an anticipated repayment date in September 2026.
−Removed: The anticipated repayment date of the VFN Notes is in September 2024, subject to two one -year extensions at the option of the Co-Issuers.
−Removed: If the Series 2021-1 Notes are not repaid or refinanced prior to their anticipated repayment date, or such date is not extended for the VFN Notes, interest will accrue at a higher rate and the Series 2021-1 Notes will begin to amortize quarterly.
+Added: The anticipated repayment date of the VFN is in September 2024, subject to two one-year extensions at the option of the Co-Issuers.
+Added: If the Series 2021-1 Notes are not repaid or refinanced prior to their anticipated repayment date, or such date is not extended for the VFN, interest will accrue at a higher rate and the Series 2021-1 Notes will begin to amortize quarterly.
The Series 2021-1 Notes may be optionally prepaid, in whole or in part, prior to their anticipated repayment dates.
−Removed: There is no prepayment penalty on the VFN Notes.
+Added: There is no prepayment penalty on the VFN.
However, prepayment of the Class A-2 Notes will be subject to additional consideration based upon the difference between the present value of future payments of principal and interest and the outstanding principal of such Class A-2 Note that is being prepaid;
1 unchanged sentence
The Indenture of the Series 2021-1 Notes contains various covenants, including financial covenants that require the maintenance of minimum thresholds for debt service coverage ratio and maximum loan-to-value ratio, as defined.
−Removed: As of the date of this filing, the Co-Issuers are in compliance with all of the financial covenants.
−Removed: Issuance of the Class A-2 Notes generated proceeds of $ 285.1 million, net of offering expenses and $ 5.4 million of interest reserve deposits.
−Removed: The Series 2021-1 Notes will provide funding for acquisition of digital infrastructure investments, satisfying commitments to sponsored funds, redemption or repayment of the Company's other higher cost corporate securities, and/or general corporate utilization.
−Removed: As of the date of this filing, the full $ 200 million under the VFN Notes is available to be drawn.
+Added: As of the date of this filing, the Co-Issuers are in compliance with all of the financial covenants, and the full $ 300 million under the VFN is available to be drawn.
Convertible and Exchangeable Senior Notes
7 unchanged sentences
5.00% Convertible Senior Notes April 2013 April 15, 2023 5.00 % $ 63.02 15.8675 3,174 April 22, 2020 $ 200,000 $ 200,000
−Removed: 3.875% Convertible Senior Notes January and June 2014 January 15, 2021 3.875 % 16.57 60.3431 1,901 January 22, 2019 — 31,502
Issued by DigitalBridge Operating Company, LLC
7 unchanged sentences
In the event of certain change in control transactions, holders of the senior notes have the right to require the applicable issuer to purchase all or part of such holder's senior notes for cash in accordance with terms of the governing documents of the respective senior notes.
−Removed: Issuance, Repurchase and Repayment of Senior Notes
−Removed: The 3.875 % convertible senior notes were fully extinguished following a $ 31.5 million repayment upon maturity in January 2021 and a $ 371.0 million repurchase in the third quarter of 2020, primarily funded by net proceeds from the July 2020 issuance of the 5.75 % exchangeable senior notes by the OP.
−Removed: Exchange of Senior Notes into Common Shares
−Removed: In the fourth quarter of 2021, DBRG and the OP entered into privately negotiated exchange agreements (the "Early Exchange Agreements") with certain noteholders of the 5.75 % exchangeable notes.
−Removed: The parties to the Early Exchange Agreements agreed to exchange transactions for which the original exchange ratio of 434.7826 shares per $1,000 of principal amount of notes was adjusted to account for savings on avoided future interest payments otherwise due to the noteholders.
−Removed: Pursuant to the Early Exchange Agreements, in October 2021 and November 2021, in aggregate, the Company exchanged $ 161.3 million of outstanding principal of the 5.75 % exchangeable notes into 73,365,420 shares of the Company's class A common stock and paid $ 3.1 million for accrued and unpaid interest through the date of the respective exchanges.
−Removed: Debt conversion expense totaling approximately $ 25.1 million was recognized in interest expense, representing the shares of the Company's class A common stock issued in excess of such shares issuable pursuant to the original exchange ratio, measured at fair value based upon the closing price of the Company's class A common stock on the date of the respective Early Exchange Agreements.
+Added: Exchange of Senior Notes For Common Stock and Cash
+Added: DBRG and the OP completed separate privately negotiated exchange transactions with certain noteholders of the 5.75 % exchangeable notes, as follows:
+Added: Principal of 5.75% Exchangeable Notes Exchanged
+Added: Consideration for Exchange
+Added: (In thousands) Class A Common Stock Issued Cash Paid
+Added: March 2022 $ 60,317 6,389 $ 13,887
+Added: October and November 2021 161,261 18,341 —
+Added: $ 221,578 24,730 $ 13,887
+Added: The March 2022 exchanges resulted in a debt extinguishment loss of $ 133.2 million, calculated as the excess of consideration paid over the carrying value of the notes exchanged, and recorded in other loss on the consolidated statement of operations.
+Added: Consideration was measured at fair value based upon the closing price of the Company's class A common stock on the date of the respective exchanges, and cash paid, net of transaction costs.
+Added: Unlike the exchange transactions in 2021, the March 2022 exchanges did not qualify for debt conversion accounting and were treated as a debt extinguishment as the Company issued less than the number of shares issuable under the stated exchange ratio of 108.696 shares per $1,000 of note principal exchanged.
+Added: The exchange transactions in the fourth quarter of 2021 were treated as debt conversions that resulted in a debt conversion expense of $ 25.1 million, recorded as interest expense, as the original exchange ratio was adjusted to account for savings on avoided future interest payments otherwise due to the noteholders.
+Added: The debt conversion expense represents the shares of the Company's class A common stock issued in excess of such shares issuable pursuant to the original exchange ratio, and measured at fair value based upon the closing price of the Company's class A common stock on the date of the respective exchanges.
Investment-Level Secured Debt
−Removed: These are investment level financing that are non-recourse to the Company and secured by underlying commercial real estate or loans receivable.
−Removed: Digital Operating —In March 2021 and October 2021, DataBank raised $ 657.9 million and $ 332 million of 5-year securitized notes at blended fixed rates of 2.32 % and 2.43 % per annum, respectively.
+Added: These are investment level financing that are non-recourse to the Company and secured by data center portfolios held by subsidiaries in the Operating segment, and at December 31, 2021, also secured by previously warehoused loans receivable.
+Added: At December 31, 2022, the subsidiaries in the Operating segment were in compliance with the financial covenants underlying their respective investment-level secured debt.
+Added: While there were no securitization activities in 2022, in 2021, however, subsidiaries in the Operating segment refinanced or raised additional debt through new securitization transactions, as follows.
+Added: In March 2021 and October 2021, DataBank raised $ 657.9 million and $ 332 million of 5-year securitized notes at blended fixed rates of 2.32 % and 2.43 % per annum, respectively.
Proceeds from the March securitization were applied principally to refinance $ 514 million of outstanding debt, which meaningfully reduced DataBank's overall cost of debt and extended its debt maturities, while the October proceeds were used to repay borrowings on its credit facility and to finance future acquisitions.
1 unchanged sentence
Proceeds were applied to replace its current bridge financing and fund capital expenditures on the September 2021 add-on acquisition as well as to fund payments for future build-out and lease-up of expansion capacity.
−Removed: Other —In the third quarter of 2021, the Company entered into a credit facility to fund the acquisition of loans that are warehoused for a future securitization vehicle.
−Removed: At December 31, 2021, $83.5 million was available to be drawn from the facility.
Future Minimum Principal Payments
The following table summarizes future scheduled minimum principal payments of debt at December 31, 2022, excluding debt classified as held for disposition (Note 21).
−Removed: Future debt principal payments are presented based upon anticipated repayment dates for notes issued under securitization financing, otherwise based upon initial maturity dates or extended maturity dates if extension criteria are met at December 31, 2021 for extensions that are at the Company's option.
+Added: Future debt principal payments are presented based upon anticipated repayment dates for notes issued under securitization financing, or based upon initial maturity dates or extended maturity dates if extension criteria are met at December 31, 2022 for extensions that are at the Company's option.
Year Ending December 31,
−Removed: (In thousands) 2022 2023 2024 2025 2026 2027 and thereafter Total
+Added: (In thousands) 2023 2024 2025 2026 2027 Total
Secured fund fee revenue notes $ — $ — $ — $ 300,000 $ — $ 300,000
1 unchanged sentence
Investment-level secured debt
−Removed: Digital Operating 6,230 228,793 616,503 1,146,267 1,619,690 600,000 4,217,483
+Added: Operating segment 228,792 879,003 1,175,250 1,750,690 600,000 4,633,735
Other — 500 — — — 500
1 unchanged sentence
Stockholders' Equity
−Removed: The table below summarizes the share activities of the Company's preferred and common stock.
+Added: The table below summarizes the share activities of the Company's preferred stock and common stock.
Number of Shares
1 unchanged sentence
Shares outstanding at December 31, 2019 41,350 121,761 183
−Removed: Redemption of preferred stock ( 16,114 ) — —
Shares issued upon redemption of OP Units — 546 —
−Removed: Repurchase of common stock — ( 652 ) —
+Added: Repurchase of common stock, net (1)
+Added: — ( 3,183 ) —
Equity-based compensation, net of forfeitures — 2,419 —
1 unchanged sentence
Shares outstanding at December 31, 2020 41,350 120,851 183
+Added: Redemption of preferred stock ( 6,010 ) — —
+Added: Exchange of notes for class A common stock — 18,341 —
Shares issued upon redemption of OP Units — 501 —
−Removed: Repurchase of common stock, net (1)
−Removed: — ( 12,733 ) —
+Added: Conversion of class B to class A common stock — 17 ( 17 )
+Added: Shares issued pursuant to settlement liability (2)
Equity awards issued, net of forfeitures — 1,645 —
1 unchanged sentence
Shares outstanding at December 31, 2021 35,340 142,144 166
−Removed: Redemption of preferred stock ( 6,010 ) — —
+Added: Stock repurchases ( 2,229 ) ( 4,195 ) —
Exchange of notes for class A common stock — 6,389 —
Shares issued upon redemption of OP Units — 100 —
−Removed: Conversion of class B to class A common stock — 68 ( 68 )
−Removed: Shares issued pursuant to settlement liability (1)
+Added: Shares issued for redemption of redeemable noncontrolling interest (Note 10)
Equity awards issued, net of forfeitures — 1,589 —
4 unchanged sentences
Shares repurchased and not reissued were cancelled.
+Added: (2) In 2021, the settlement liability was settled through the reissuance of some of the shares previously repurchased and held in a subsidiary (Note 11).
+Added: Shares of class A common stock repurchased and not reissued in the settlement of the liability were subsequently cancelled.
Preferred Stock
8 unchanged sentences
Series H 7.125 % April 2015 8,430 $ 84 $ 210,756 Currently redeemable
−Removed: Series I 7.15 % June 2017 13,800 138 345,000 June 5, 2022
−Removed: Series J 7.125 % September 2017 12,600 126 315,000 September 22, 2022
+Added: Series I 7.15 % June 2017 12,989 130 324,728 Currently redeemable
+Added: Series J 7.125 % September 2017 11,692 117 292,295 Currently redeemable
33,111 $ 331 $ 827,779
1 unchanged sentence
Dividends on Series H, I and J of preferred stock are payable quarterly in arrears in January, April, July and October.
−Removed: Each series of preferred stock is redeemable on or after the earliest redemption date for that series at $ 25.00 per share plus accrued and unpaid dividends (whether or not declared) exclusively at the Company’s option.
−Removed: The redemption period for each series of preferred stock is subject to the Company’s right under limited circumstances to redeem the preferred stock earlier in order to preserve its qualification as a REIT or upon the occurrence of a change of control (as defined in the articles supplementary relating to each series of preferred stock).
+Added: Each series of preferred stock is redeemable on or after the earliest redemption date for that series at $ 25.00 per share plus accrued and unpaid dividends (whether or not declared) prorated to their redemption dates, exclusively at the Company’s option.
+Added: The redemption period for each series of preferred stock is subject to the Company’s right under limited circumstances to redeem the preferred stock upon the occurrence of a change of control (as defined in the articles supplementary relating to each series of preferred stock).
Preferred stock generally does not have any voting rights, except if the Company fails to pay the preferred dividends for six or more quarterly periods (whether or not consecutive).
Under such circumstances, the preferred stock will be entitled to vote, together as a single class with any other series of parity stock upon which like voting rights have been conferred and are exercisable, to elect two additional directors to the Company’s board of directors, until all unpaid dividends have been paid or declared and set aside for payment.
−Removed: In addition, certain changes to the terms of any series of
−Removed: preferred stock cannot be made without the affirmative vote of holders of at least two-thirds of the outstanding shares of each such series of preferred stock voting separately as a class for each series of preferred stock.
−Removed: Redemption of Preferred Stock
−Removed: The Company redeemed all of its outstanding 7.5 % Series G preferred stock in August 2021 for $ 86.8 million using proceeds from its securitized financing facility and 2,560,000 shares of its 7.125 % Series H preferred stock in November 2021 for approximately $ 64.4 million.
−Removed: In January 2020, the Company settled the December 2019 redemption of its outstanding Series B and Series E preferred stock for $ 402.9 million.
−Removed: All preferred stock redemptions are at $ 25.00 per share liquidation preference plus accrued and unpaid dividends prorated to their redemption dates.
−Removed: The excess or deficit of the $ 25.00 per share liquidation preference over the carrying value of the preferred stock redeemed results in a decrease or increase to net income attributable to common stockholders, respectively.
+Added: In addition, certain changes to the terms of any series of preferred stock cannot be made without the affirmative vote of holders of at least two-thirds of the outstanding shares of each such series of preferred stock voting separately as a class for each series of preferred stock.
Except with respect to voting rights, class A common stock and class B common stock have the same rights and privileges and rank equally, share ratably in dividends and distributions, and are identical in all respects as to all matters.
4 unchanged sentences
In addition, each holder of class B common stock has the right, at the holder’s option, to convert all or a portion of such holder’s class B common stock into an equal number of shares of class A common stock.
−Removed: The Company suspended dividends on its class A common stock beginning with the second quarter of 2020.
−Removed: Payment of common dividends was previously subject to certain restrictions under the terms of the corporate credit facility, which was terminated in July 2021.
−Removed: The Company continues to monitor its financial performance and liquidity position, and will reevaluate its dividend policy as conditions improve.
−Removed: Common Stock Repurchases
−Removed: During the first quarter of 2020 and for the year ended December 31, 2019, the Company repurchased its class A common stock totaling 12,733,204 shares at a cost of $ 24.6 million and 652,311 shares at a cost of $ 3.2 million, respectively, or a weighted average price of $ 1.93 and $ 4.84 per share, respectively, pursuant to a $ 300 million share repurchase program that expired in May 2020.
+Added: The Company reinstated quarterly common stock dividends at $0.01 per share beginning the third quarter of 2022, having previously suspended common stock dividends from the second quarter of 2020 through the second quarter of 2022.
Dividend Reinvestment and Direct Stock Purchase Plan
1 unchanged sentence
The DRIP Plan involves the acquisition of the Company's class A common stock either in the open market, directly from the Company as newly issued common stock, or in privately negotiated transactions with third parties.
−Removed: There were no shares of class A common stock acquired under the DRIP Plan in the form of new issuances in the last three years.
+Added: To date, no shares of class A common stock have been acquired under the DRIP Plan in the form of new issuances in the last three years.
+Added: Reverse Stock Split
+Added: In August 2022, the Company effectuated a one-for-four reverse stock split of its outstanding shares of class A and class B common stock.
+Added: The number of authorized shares of common stock was not adjusted in connection with the reverse stock split, however, the Company intends to seek stockholder approval to make a proportional change to the number of authorized shares of class A and class B common stock at its next annual meeting of stockholders.
+Added: Par value of common stock was proportionately increased from $ 0.01 to $ 0.04 per share.
+Added: Common stock share and per share information, including OP Units and stock award units, as well as the Company's senior note conversion or exchange ratio in common stock shares have been revised for all periods presented to give effect to the reverse stock split.
+Added: Stock Repurchases and Redemptions
+Added: Pursuant to a $ 200 million stock repurchase program announced in July 2022, the Company repurchased (i) 2,228,805 shares in aggregate across Series H, I and J preferred stock at a discount for $ 52.6 million, or a weighted average price of $ 23.62 per share;
+Added: and (ii) 4,195,020 shares of class A common stock for $ 54.9 million, or a weighted average price of $ 13.09 per share, in the third and fourth quarters of 2022.
+Added: The program expires on June 30, 2023 and may be extended, modified, or discontinued at any time by the Company's Board of Directors.
+Added: In 2021, the Company redeemed all of its outstanding 7.5 % Series G preferred stock in August for $ 86.8 million using proceeds from its securitized financing facility and 2,560,000 shares of its 7.125 % Series H preferred stock in November for approximately $ 64.4 million.
+Added: All redemptions were made at the liquidation preference of $ 25.00 per share.
+Added: In January 2020, the Company settled the December 2019 redemption of its outstanding Series B and Series E preferred stock for $ 402.9 million.
+Added: During the first quarter of 2020, pursuant to a $ 300 million stock repurchase program that expired in May 2020, the Company repurchased 3,183,301 shares of class A common stock for $ 24.6 million, or a weighted average price of $ 7.73 per share.
+Added: With respect to preferred stock, the excess or deficit of the repurchase or redemption price over the carrying value of the preferred stock results in a decrease or increase to net income attributable to common stockholders, respectively.
Accumulated Other Comprehensive Income (Loss)
12 unchanged sentences
Amounts reclassified from AOCI ( 2,998 ) — 233 10,153 ( 39,779 ) ( 32,391 )
+Added: Deconsolidation of investment entities — — — ( 1,482 ) — ( 1,482 )
AOCI at December 31, 2021 $ 2,334 $ 5,861 $ — $ 26,502 $ 7,686 $ 42,383
1 unchanged sentence
Amounts reclassified from AOCI ( 200 ) ( 5,861 ) — ( 16,793 ) ( 16,082 ) ( 38,936 )
−Removed: Deconsolidation of investment entities — — — ( 1,482 ) — $ ( 1,482 )
AOCI at December 31, 2022 $ ( 295 ) $ — $ — $ ( 1,214 ) $ — $ ( 1,509 )
5 unchanged sentences
AOCI at December 31, 2020 $ ( 1,030 ) $ 83,845 $ 15,099 $ 97,914
−Removed: Other comprehensive income (loss) before reclassifications ( 25 ) 101,853 5,313 107,141
+Added: Other comprehensive loss before reclassifications — ( 65,127 ) — ( 65,127 )
Amounts reclassified from AOCI 1,030 ( 1,364 ) ( 15,099 ) ( 15,433 )
+Added: Deconsolidation of investment entities — ( 6,297 ) — ( 6,297 )
AOCI at December 31, 2021 $ — $ 11,057 $ — $ 11,057
1 unchanged sentence
Amounts reclassified from AOCI — ( 9,501 ) — ( 9,501 )
−Removed: Deconsolidation of investment entities — ( 6,297 ) — ( 6,297 )
AOCI at December 31, 2022 $ — $ ( 3,015 ) $ — $ ( 3,015 )
7 unchanged sentences
Relief of basis of AFS debt securities $ 5,861 $ — $ 3,595 Other gain (loss), net
−Removed: Other-than-temporary impairment of AFS debt securities (prior to 2020) — — ( 15,356 ) Other gain (loss), net
Release of foreign currency cumulative translation adjustments 16,793 ( 10,153 ) ( 225 ) Other gain (loss), net
6 unchanged sentences
Redeemable Noncontrolling Interests
−Removed: The following table presents the activity in redeemable noncontrolling interests in the Company's digital investment management business, as discussed below, and in open-end funds sponsored and consolidated by the Company.
+Added: The following table presents the activity in redeemable noncontrolling interests in the Company's investment management business through redemption in May 2022, as discussed below, and in open-end funds sponsored and consolidated by the Company.
Year Ended December 31,
3 unchanged sentences
Contributions 11,650 42,514 307,414
−Removed: Distributions and redemptions ( 23,246 ) ( 8,859 ) ( 5,837 )
−Removed: Net income 34,677 616 2,559
+Added: Distributions paid and payable, including redemptions by limited partners in consolidated funds ( 20,784 ) ( 23,246 ) ( 8,859 )
+Added: Net income (loss) ( 26,778 ) 34,677 616
+Added: Adjustment of Wafra's interest to redemption value and warrants held by Wafra to fair value 725,026 — —
+Added: Redemption of Wafra's interest ( 862,276 ) — —
+Added: Reclassification of warrants held by Wafra to liability in May 2022 (Note 7)
+Added: ( 81,400 ) — —
+Added: Reclassification of Wafra's carried interest allocation to noncontrolling interests in investment entities in May 2022 ( 4,087 ) — —
Ending balance $ 100,574 $ 359,223 $ 305,278
−Removed: Strategic Partnership in the Company's Digital Investment Management Business
+Added: Redeemable Noncontrolling Interest in Investment Management
+Added: Strategic Investment in 2020
In July 2020, the Company formed a strategic partnership with affiliates of Wafra, Inc.
−Removed: (collectively, "Wafra"), a private investment firm and a global partner for alternative asset managers, in which Wafra made a minority investment in substantially all of the Company's digital investment management business (as defined for purposes of this transaction, the "Digital IM Business").
−Removed: The investment entitles Wafra to participate in approximately 31.5 % of the net management fees and carried interest generated by the Digital IM Business.
−Removed: Pursuant to this strategic partnership, Wafra has assumed directly and also indirectly through a participation interest $ 124.9 million of the Company's commitments to DBP I, and has a $ 125.0 million commitment to DBP II that has been partially funded to-date.
−Removed: Wafra has also agreed to make commitments to the Company's future digital funds and investment vehicles on a pro rata basis with the Company based on Wafra's percentage interest in the Digital IM Business, subject to certain caps.
+Added: (collectively, "Wafra"), a private investment firm and a global partner for alternative asset managers, in which Wafra made a minority investment in substantially all of the Company's investment management business.
+Added: The investment entitled Wafra to participate in approximately 31.5 % of the net management fees and carried interest generated by the investment management business.
+Added: Pursuant to this strategic partnership, Wafra assumed directly and also indirectly through a participation interest $ 124.9 million of the Company's commitments to DigitalBridge Partners, LP ("DBP I"), and has a $ 125.0 million commitment to DigitalBridge Partners II, LP ("DBP II") that has been partially funded to-date.
+Added: These are the Company's flagship value-add equity infrastructure funds.
+Added: Wafra had also agreed to make commitments to the Company's future funds and investment vehicles on a pro rata basis with the Company based on Wafra's percentage interest in the investment management business, subject to certain caps.
In addition, the Company issued Wafra five warrants to purchase up to an aggregate of 5 % of the Company’s class A common stock ( 5 % at the time of the transaction, on a fully-diluted, post-transaction basis).
−Removed: Each warrant entitles Wafra to purchase up to 5,352,000 shares of the Company's class A common stock, with staggered strike prices between $ 2.43 and $ 6.00 for each warrant, exercisable until July 17, 2026.
+Added: Each warrant entitles Wafra to purchase up to 1,338,000 shares of the Company's class A common stock at staggered strike prices between $ 9.72 and $ 24.00 each, exercisable through July 17, 2026.
No warrants have been exercised to-date.
−Removed: Wafra paid cash consideration of $ 253.6 million at closing in exchange for its investment in the Digital IM Business and for the warrants.
−Removed: As previously agreed, Wafra paid additional consideration of $ 29.9 million in the Digital IM Business in April 2021 based upon the Digital IM Business having achieved a minimum run-rate of earnings before interest, tax, depreciation and amortization (as defined for the purpose of this computation) of $ 72.0 million as of December 31, 2020.
−Removed: The Compensation Committee of the Board of Directors has approved an allocation of 50 % of the contingent consideration received from Wafra as additional bonus compensation to management, to be paid on behalf of certain employees to fund a portion of their share of capital contributions to the DBP funds as capital calls are made for these funds.
−Removed: Compensation expense is recognized over time based upon an estimated timeline for deployment of capital by the funds, which will correspond to the timing of capital calls to be funded by the Company on behalf of management.
−Removed: Under certain circumstances following such time as the Digital IM Business comprises 90 % or more of the Company's assets, the Company has agreed to use commercially reasonable efforts to facilitate the conversion of Wafra's interest into shares of the Company's class A common stock.
−Removed: There can be no assurances that such conversion would occur or on what terms and conditions such conversion would occur, including whether such conversion, if it did occur in the future, would have any adverse impact on the Company, the Company’s stock price, governance and other matters.
−Removed: Wafra has customary minority rights and certain other structural protections designed to protect its interests, including redemption rights with respect to its investment in the Digital IM Business and its funded commitments in certain digital funds.
−Removed: Wafra's redemption rights will be triggered upon the occurrence of certain events, including key person or cause events under the governing documents of certain digital funds.
−Removed: To further enhance the alignment of interests, the Company entered into an amended and restated restrictive covenant agreement with each of Mr.
−Removed: Ganzi and Mr.
−Removed: Jenkins, pursuant to which they agreed to certain enhanced non-solicitation provisions and extension of the term of existing non-competition agreements.
−Removed: Wafra’s investment provides the Company with permanent capital to pursue strategic digital infrastructure investments and further grow the Digital IM Business.
+Added: Wafra paid cash consideration of $ 253.6 million at closing in exchange for its investment in the investment management business and for the warrants.
+Added: As previously agreed, Wafra paid additional consideration of $ 29.9 million in April 2021 based upon the investment management business having achieved a minimum run-rate of earnings before interest, tax, depreciation and amortization (as defined for the purpose of this computation) of $ 72.0 million as of December 31, 2020.
+Added: The Compensation Committee of the Board of Directors had approved an allocation of 50 % of the contingent consideration received from Wafra as incentive compensation to management, to be paid on behalf of certain employees to fund a portion of their share of capital contributions to the DBP funds as capital calls are made for these funds.
+Added: Compensation expense is recognized over time based upon an estimated timeline for deployment of capital by the funds, adjusted as necessary to correspond to the actual timing of capital calls to be funded by the Company on behalf of management.
+Added: Wafra had customary minority rights and certain other structural protections designed to protect its interests, including redemption rights with respect to its investment in the investment management business and its funded commitments in certain digital funds.
+Added: Wafra's redemption rights were subject to triggering events, including key person or cause events under the governing documents of certain digital funds.
+Added: Redemption of Strategic Investment in 2022
+Added: On May 23, 2022, pursuant to a purchase and sale agreement ("PSA") entered into with Wafra in April 2022:
+Added: (a) the Company acquired Wafra's 31.5 % interest in its investment management business;
+Added: (b) Wafra’s entitlement to carried interest in DBP II was reduced from 12.6 % to 7 %;
+Added: and (c) with certain limited exceptions, Wafra sold or gave up its right to invest in, or receive carried interest from, future investment management products, but except as otherwise provided, retained its investment in and its allocation of carried interest from existing investment management products.
+Added: Consideration for the redemption of Wafra's interest consisted of:
+Added: (i) an upfront payment of $ 388.5 million in cash (after certain net cash adjustments) and 14,435,399 shares of the Company's Class A common stock valued at $ 348.8 million based upon the closing price of the Company's class A common stock on May 23, 2022;
+Added: and (ii) Wafra's right to earn a contingent amount between $ 90 million and $ 125 million if the Company raises fee earning equity under management (as defined in the PSA) between $ 4 billion and $ 6 billion during the period from December 31, 2021 to December 31, 2023, payable in March 2023 for portion earned in 2022 and March 2024 for any remaining portion earned in 2023, with up to 50 % payable in shares of the Company's Class A common stock at the Company's election.
+Added: Based upon the capital raised by the Company in 2022, $ 90 million is payable to Wafra in March 2023.
+Added: The carrying value of Wafra's redeemable noncontrolling interest was adjusted to fair value prior to redemption, initially based upon an estimate of consideration payable at March 31, 2022 when redemption was deemed to be probable, including the maximum potential contingent amount of $ 125 million.
+Added: This adjustment resulted in an allocation from additional paid-in capital to redeemable noncontrolling interests on the consolidated balance sheet.
+Added: Additionally, the unrealized carried interest earnings allocated to Wafra that was retained and no longer subject to redemption was reclassified in May 2022 to permanent equity, included in noncontrolling interests in investment entities.
+Added: In connection with the redemption, the terms of the warrants previously issued to Wafra were amended, among other things, to provide for net cash settlement upon exercise of the warrants, at election of either the Company or Wafra, if such exercise would result in Wafra beneficially owning in excess of 9.8 % of the issued and outstanding shares of the Company's class A common stock.
+Added: Inclusion of the cash settlement feature changed the classification of the warrants from equity to liability.
+Added: The warrants were remeasured to fair value prior to reclassification in May 2022, with the increase in value recorded in equity to reduce additional paid-in capital.
+Added: Subsequent changes in fair value of the warrant liability is recorded in earnings (Note 11).
+Added: The Company's redemption of Wafra's interest also resulted in the assumption of $ 5.2 million of deferred tax asset that now accrues to the Company.
+Added: Following the redemption, the Chief Investment Officer of Wafra, Adel Alderbas, will serve as a senior advisor to the Company for a period of three years.
+Added: Noncontrolling Interests in Investment Entities
+Added: DataBank Additional Investment
+Added: In January 2022, a shareholder of DataBank sold its equity interest to the Company and an existing investor, resulting in an additional $ 32.0 million investment by the Company in DataBank.
+Added: Following this transaction and additional equity funded by the shareholders of DataBank in connection with its data center acquisition in March 2022 (Note 3), the Company's interest in DataBank increased from 20 % to 21.8 % (prior to recapitalization as discussed below).
+Added: DataBank Recapitalization
+Added: DataBank was partially recapitalized in the second half of 2022 through multiple sales of equity interest to new investors totaling $ 2.0 billion in cash.
+Added: The Company's ownership interest in DataBank decreased from 21.8 % (as noted above) to 11.0 %.
+Added: The Company's share of proceeds from the sale was $ 425.5 million, including its share of carried interest net of allocation to employees.
+Added: As the transaction involved a change in ownership of a consolidated subsidiary, it was accounted for as an equity transaction.
+Added: The difference between the book value of the Company's interest and its ownership based upon the current value of DataBank resulted in a reallocation from noncontrolling interests in investment entities to additional paid-in capital of $ 230.2 million.
+Added: The recapitalization transaction triggered an accelerated vesting of certain profits interest units that had been issued by DataBank to its employees.
+Added: As a result of the accelerated vesting, $ 10 million of additional equity based compensation was recorded in 2022 based upon DataBank's original grant date fair value of these awards, of which $ 7.8 million was attributable to noncontrolling interests in investment entities.
Noncontrolling Interests in Operating Company
2 unchanged sentences
At the end of each period, noncontrolling interests in OP is adjusted to reflect their ownership percentage in OP at the end of the period, through a reallocation between controlling and noncontrolling interests in OP.
−Removed: Issuance of OP Units —The Company issued OP Units totaling 21,478,515 in July 2019 and 612,072 in December
−Removed: 2019 as part of the consideration for the acquisitions of DBH, valued at $ 111.9 million, and DataBank, valued at $ 3.0 million, based upon the closing price of the Company's class A common stock on July 24, 2019 and December 20, 2019, respectively (Note 3).
−Removed: There were no OP Units issued in 2021 and 2020.
−Removed: Redemption of OP Units —The Company redeemed OP Units totaling 2,005,367 in 2021, 2,184,395 in 2020 and 187,995 in 2019 through the issuance of an equal number of shares of class A common stock on a one -for-one basis.
+Added: Redemption of OP Units —The Company redeemed 100,220 OP Units in 2022 and 501,341 OP Units in 2021 through the issuance of an equal number of shares of class A common stock on a one -for-one basis .
+Added: Recurring Fair Values
+Added: Financial assets and financial liabilities carried at fair value on a recurring basis include financial instruments for which the fair value option was elected, but exclude financial assets under the NAV practical expedient.
+Added: Fair value is categorized into a three tier hierarchy that is prioritized based upon the level of transparency in inputs used in the valuation techniques.
+Added: Marketable Equity Securities
+Added: Marketable equity securities with long positions of $ 155.9 million at December 31, 2022 and $ 201.9 million at December 31, 2021, included in equity investments (Note 5), and short positions of $ 40.9 million at December 31, 2022 and $ 38.0 million at December 31, 2021, included in other liabilities (Note 7), consist of publicly traded equity securities held largely by private open-end funds sponsored and consolidated by the Company.
+Added: The equity securities of the consolidated funds comprise listed stocks primarily in the U.S.
+Added: and to a lesser extent, in Europe, and predominantly in the technology, media and telecommunications sectors.
+Added: These marketable equity securities are valued based upon listed prices in active markets and classified as Level 1 of the fair value hierarchy.
+Added: Debt Securities
+Added: At December 31, 2022, the CLO subordinated notes were carried at their recently issued price of $ 50.9 million (Note 5), which represents their current estimated fair value, classified as Level 3 of the fair value hierarchy.
+Added: Fair value was determined using a benchmarking approach by looking to the implied credit spreads derived from observed prices on comparable CLO issuances in the fourth quarter of 2022, and also considering the current size and diversification of the CLO collateral pool and projected return on the subordinated notes.
+Added: Equity Investment of Consolidated Fund
+Added: A consolidated fund, investing alongside other affiliated managed funds, holds an indirect investment in a portfolio of loans.
+Added: The investment has a fair value of $ 46.8 million at December 31, 2022, classified as Level 3 of the fair value hierarchy.
+Added: Fair value was determined based upon discounted cash flow projections of distributions of principal and interest expected to be collected from the underlying loans, which include, but are not limited to, consideration of the financial standing and operating results of the borrowers, and applying a discount rate of 10.1 %.
+Added: The Company's derivative instruments generally consist of:
+Added: (i) foreign currency put options, forward contracts and costless collars to hedge the foreign currency exposure of certain foreign-denominated investments or investments in foreign subsidiaries (in GBP and EUR), with notional amounts and termination dates based upon the anticipated return of capital from these investments;
+Added: and (ii) interest rate caps and swaps to limit the exposure to changes in interest rates on various floating rate debt obligations (indexed to LIBOR or Euribor).
+Added: These derivative contracts may be designated as qualifying hedge accounting relationships, specifically as net investment hedges and cash flow hedges, respectively.
+Added: Fair values were $ 11.8 million (Note 16) at December 31, 2022 and $ 0.9 million at December 31, 2021 for derivative assets, included in other assets.
+Added: There were no derivatives in a liability position at December 31, 2022 and 2021.
+Added: At December 31, 2022, all derivative positions in both periods were non-designated hedges.
+Added: Derivative notional amounts aggregated to the equivalent of $ 321.1 million at December 31, 2022 and $ 182.3 million at December 31, 2021 for foreign exchange contracts, and $ 2.0 billion at December 31, 2021 for interest rate contracts.
+Added: There were no outstanding interest rate contracts at December 31, 2022.
+Added: The derivative instruments are subject to master netting arrangements with counterparties that allow the Company to offset the settlement of derivative assets and liabilities in the same currency by instrument type or, in the event of default by the counterparty, to offset all derivative assets and liabilities with the same counterparty.
+Added: Notwithstanding the conditions for right of offset may have been met, the Company presents derivative assets and liabilities with the same counterparty on a gross basis on the consolidated balance sheets.
+Added: Realized and unrealized gains and losses on derivative instruments are recorded in other gain (loss) on the consolidated statement of operations, other than interest expense, as follows:
+Added: Year Ended December 31,
+Added: (In thousands) 2022 2021 2020
+Added: Foreign currency contracts:
+Added: Designated contracts
+Added: Realized gain transferred from AOCI to earnings $ 17,334 $ 58,727 $ 414
+Added: Unrealized gain transferred from AOCI to earnings — — 1,485
+Added: Non-designated contracts
+Added: Realized and unrealized gain (loss) in earnings (1)
+Added: 17,092 889 ( 2,727 )
+Added: Interest rate contracts:
+Added: Designated contracts
+Added: Interest expense (2)
+Added: Realized loss transferred from AOCI to earnings — ( 1,328 ) —
+Added: Non-designated contracts
+Added: Realized and unrealized gain (loss) in earnings 11,533 ( 213 ) ( 209 )
+Added: (1) In 2022, includes unrealized gain on foreign currency contract entered into on behalf of sponsored fund, which has no net impact to the Company's earnings, as discussed in Note 16.
+Added: (2) Represents amortization of the cost of designated interest rate caps to interest expense based upon expected hedged interest payments on variable
+Added: The Company's foreign currency and interest rate contracts are generally traded over-the-counter, and are valued using a third-party service provider.
+Added: Quotations on over-the-counter derivatives are not adjusted and are generally valued using observable inputs such as contractual cash flows, yield curve, foreign currency rates and credit spreads, and are classified as Level 2 of the fair value hierarchy.
+Added: Although credit valuation adjustments, such as the risk of default, rely on Level 3 inputs, these inputs are not significant to the overall valuation of the derivatives.
+Added: As a result, derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy.
+Added: As discussed in Note 10, the Company issued five warrants to Wafra.
+Added: Each warrant entitles Wafra to purchase up to 1,338,000 shares of the Company's class A common stock at staggered strike prices between $ 9.72 and $ 24.00 each, exercisable through July 17, 2026.
+Added: No warrants have been exercised to-date.
+Added: The warrants are carried at fair value effective May 2022 when they were reclassified from equity to liability, with subsequent changes in fair value recorded in earnings.
+Added: At December 31, 2022, the warrants, classified as Level 3 fair value, were valued at $ 17.7 million using a Black-Scholes option pricing model, applying the following inputs:
+Added: (a) estimated volatility for DBRG's class A common stock of 40.8 %;
+Added: (b) closing stock price of DBRG's class A common stock on the last trading day of the quarter;
+Added: (c) the strike price for each warrant;
+Added: (d) remaining term to expiration of the warrants;
+Added: and (e) risk free rate of 4.16 % per annum, derived from the daily U.S.
+Added: Treasury yield curve rates to correspond to the remaining term to expiration of the warrants.
+Added: Fair value of the warrants decreased $ 63.7 million from its initial remeasurement in May 2022, recorded in other gain on the consolidated statement of operations.
+Added: Settlement Liability
+Added: In March 2020, the Company entered into a cooperation agreement with Blackwells Capital LLC ("Blackwells"), a stockholder of the Company.
+Added: Pursuant to the cooperation agreement, Blackwells agreed to a standstill in its proxy contest with the Company, and to abide by certain voting commitments, including a standstill with respect to the Company until the expiration of the agreement in March 2030 and voting in favor of the Board of Directors' recommendations until the third anniversary of the agreement.
+Added: Contemporaneously, the Company and Blackwells entered into a joint venture arrangement for the purpose of acquiring, holding and disposing of the Company's class A common stock.
+Added: Pursuant to the arrangement, the Company contributed its class A common stock, valued at $ 14.7 million by the venture, and Blackwells contributed $ 1.47 million of cash that was then distributed to the Company, resulting in a net capital contribution of $ 13.23 million by the Company in the venture.
+Added: All of the class A common stock held in the venture was repurchased by the Company in March 2020 (Note 9).
+Added: Distributions from the joint venture arrangement upon dissolution effectively represent a settlement of the proxy contest with Blackwells.
+Added: The initial fair value of the arrangement was recorded as a settlement loss on the statement of operations in March 2020, with a corresponding liability on the balance sheet, subject to remeasurement at each period end.
+Added: The settlement liability represents the fair value of the disproportionate allocation of profits distribution to Blackwells pursuant to the joint venture arrangement.
+Added: The profits are derived from dividend payments and appreciation in value of the Company's class A common stock, allocated between the Company and Blackwells based upon specified return hurdles.
+Added: In June 2021, Blackwells terminated the arrangement and the joint venture was dissolved.
+Added: The profits distribution allocated to Blackwells was valued at $ 47.0 million and paid in the form of 1.49 million shares of the Company's class A common stock, with $ 22.8 million recognized in 2021 through termination as other loss on the consolidated statement of operations.
+Added: Fair Value Option
+Added: The following discussion excludes loans receivable and equity method investments held for disposition which are addressed in Note 21.
+Added: Loans Receivable
+Added: Loans receivable held for investment are carried at fair value under the fair value option.
+Added: At December 31, 2022, loans held for investments, which primarily consisted of an unsecured promissory note in connection with the sale of NRF Holdco (Note 22), had fair value totaling $ 137.9 million (unpaid principal balance, inclusive of paid-in-kind ("PIK") interest, of $ 167.8 million), classified as Level 3 in the fair value hierarchy.
+Added: At December 31, 2021, loans held for investments, which primarily consisted of corporate loans and bank syndicated loans then warehoused by the Company, had fair value totaling $ 173.9 million (unpaid principal balance, inclusive of PIK interest, of $ 173.5 million), of which $ 91.0 million was classified as Level 2 and $ 82.9 million as Level 3 in the fair value hierarchy.
+Added: During 2022, all of the warehoused loans were either transferred to the Company's new sponsored fund or securitized into a third party sponsored CLO (Note 5).
+Added: Fair value of Level 3 loans held for investment were determined based upon discounted cash flow projections of principal and interest expected to be collected, which include, but are not limited to, consideration of the financial standing and operating results of the borrower, and applying discount rates ranging between 10.0 % to 10.5 % at December 31, 2022 and 8.9 % to 10.0 % at December 31, 2021.
+Added: Level 2 loans held for investment at December 31, 2021 represent bank syndicated loans for which fair value was obtained from a reputable pricing service and was based upon quotations from dealers who act as market makers for these loans.
+Added: There were no loans that were 90 days or more past due as to principal or interest at December 31, 2022 and December 31, 2021.
+Added: As of December 31, 2022, one loan with fair value of $ 4.6 million and unpaid principal balance of $ 5.8 million has been placed on nonaccrual.
+Added: Equity Method Investments
+Added: At December 31, 2022 and 2021, there were no equity method investments under the fair value option other than investments held for disposition (Note 21).
+Added: One equity method investment that was under the fair value option is accounted for as a marketable equity security beginning May 2021 following a merger of the investee into a special purpose acquisition company.
+Added: The following table presents changes in recurring Level 3 fair value assets held for investment.
+Added: Realized and unrealized gains (losses) are included in other gain (loss) for loans receivable and equity method earnings (losses) for equity method investments.
+Added: Fair Value Option Equity Investment of Consolidated Fund
+Added: (In thousands) AFS Debt Securities Loans Held for Investment Equity Method Investments
+Added: Fair value at December 31, 2020 $ — $ 36,798 $ 28,540 $ —
+Added: Purchases, originations, drawdowns and contributions — 61,026 — —
+Added: Paydowns, distributions and sales — ( 16,470 ) ( 9,174 ) —
+Added: Change in accounting method for equity interest — — ( 27,626 ) —
+Added: Change in accrued interest and capitalization of paid-in-kind interest — 1,761 — —
+Added: Realized and unrealized gain (loss) in earnings, net — ( 185 ) 8,260 —
+Added: Fair value at December 31, 2021 $ — $ 82,930 $ — $ —
+Added: Net unrealized loss in earnings on instruments held at December 31, 2021 $ — $ ( 1,114 ) $ — $ —
+Added: Fair value at December 31, 2021 $ — $ 82,930 $ — $ —
+Added: Purchases, originations, drawdowns and contributions 50,927 371,415 — 35,566
+Added: Paydowns, distributions and sales
+Added: — ( 159,501 ) — —
+Added: Transfer of warehoused loans to sponsored fund — ( 123,312 ) — —
+Added: Consolidation of sponsored fund — — — 10,536
+Added: Change in accrued interest and capitalization of paid-in-kind interest — 5,814 — —
+Added: Realized and unrealized gain (loss) in earnings, net — ( 39,401 ) — 668
+Added: Fair value at December 31, 2022 $ 50,927 $ 137,945 $ — $ 46,770
+Added: Net unrealized gain (loss) in earnings on instruments held at December 31, 2022 $ — $ ( 29,311 ) $ — $ 668
+Added: Investment Carried at Fair Value Using Net Asset Value
+Added: The Company has an investment in a non-traded healthcare REIT of $ 34.5 million at December 31, 2022 and $ 44.6 million at December 31, 2021, with no commitment for any further investment in the future.
+Added: The investment is valued based upon actual or estimated NAV beginning October 2021 when the investee, a healthcare real estate investor/manager, was acquired in conjunction with a merger of its co-sponsored non-traded REITs.
+Added: The transaction diluted the Company's equity interest in the investee, which was previously accounted for as an equity method investment.
+Added: Redemption of the Company's partnership interest in the non-traded healthcare REIT is restricted until the earliest of (1) the second anniversary of the issuance to the Company of such partnership units, (2) change in control of the general partner, and (3) initial public offering of the equity of the non-traded healthcare REIT, which may be subject to further restriction on redemption by the underwriters.
+Added: Nonrecurring Fair Values
+Added: The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.
+Added: Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for disposition or otherwise, write-down of asset values due to impairment.
+Added: Impairment is discussed in Note 5 for equity investments and Note 21 for assets held for disposition.
+Added: Fair Value of Financial Instruments Reported at Cost
+Added: Fair value of financial instruments reported at amortized cost, excluding those held for disposition, are presented below.
+Added: Fair Value Measurements Carrying Value
+Added: (In thousands) Level 1 Level 2 Level 3 Total
+Added: December 31, 2022
+Added: Debt at amortized cost
+Added: Secured fund fee revenue notes $ — $ 250,547 $ — $ 250,547 $ 292,171
+Added: Convertible and exchangeable senior notes 304,513 — — 304,513 276,741
+Added: Investment-level secured debt — 3,268,508 944,984 4,213,492 4,587,228
+Added: December 31, 2021
+Added: Debt at amortized cost
+Added: Secured fund fee revenue notes $ — $ — $ 291,394 $ 291,394 $ 291,394
+Added: Convertible and exchangeable senior notes 716,970 — — 716,970 334,264
+Added: Investment-level secured debt — 3,598,655 655,270 4,253,925 4,234,744
+Added: Debt —Senior notes and secured fund fee revenue notes were valued using their last traded price.
+Added: Fair value of investment-level debt were estimated by either discounting expected future cash outlays at interest rates available to the respective borrower subsidiaries for similar instruments or for securitized debt, based upon indicative bond prices quoted by brokers in the secondary market.
+Added: Other —The carrying values of cash and cash equivalents, accounts receivable, due from and to affiliates, interest payable and accounts payable generally approximate fair value due to their short term nature, and credit risk, if any, is negligible.
+Added: Variable Interest Entities
+Added: A VIE is an entity that lacks sufficient equity to finance its activities without additional subordinated financial support from other parties, or whose equity holders lack the characteristics of a controlling financial interest.
+Added: The following discusses the Company's involvement with VIEs where the Company is the primary beneficiary and consolidates the VIEs or where the Company is not the primary beneficiary and does not consolidate the VIEs.
+Added: Operating Subsidiary
+Added: The Company's operating subsidiary, OP, is a limited liability company that has governing provisions that are the functional equivalent of a limited partnership.
+Added: The Company holds the majority of membership interest in OP, acts as the managing member of OP and exercises full responsibility, discretion and control over the day-to-day management of OP.
+Added: The noncontrolling interests in OP do not have substantive liquidation rights, substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of noncontrolling interest members (including by such a member unilaterally).
+Added: The absence of such rights, which represent voting rights in a limited partnership equivalent structure, would render OP to be a VIE.
+Added: The Company, as managing member, has the power to direct the core activities of OP that most significantly affect OP's performance, and through its majority interest in OP, has both the right to receive benefits from and the obligation to absorb losses of OP.
+Added: Accordingly, the Company is the primary beneficiary of OP and consolidates OP.
+Added: As the Company conducts its business and holds its assets and liabilities through OP, the total assets and liabilities, earnings (losses), and cash flows of OP represent substantially all of the total consolidated assets and liabilities, earnings (losses), and cash flows of the Company.
+Added: Company-Sponsored Private Funds
+Added: The Company sponsors private funds and other investment vehicles as general partner for the purpose of providing investment management services in exchange for management fees and carried interest.
+Added: These private funds are established as limited partnerships or equivalent structures.
+Added: Limited partners of the private funds do not have either substantive liquidation rights, or substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of limited partners or by a single limited partner.
+Added: Accordingly, the absence of such rights, which represent voting rights in a limited partnership, results in the private funds being considered VIEs.
+Added: The nature of the Company's involvement with its sponsored funds comprise fee arrangements and general partner and limited partner
+Added: equity interests.
+Added: The fee arrangements are commensurate with the level of management services provided by the Company, and contain terms and conditions that are customary to similar at-market fee arrangements.
+Added: Consolidated Company-Sponsored Private Funds —The Company currently consolidates sponsored private funds in which it has more than an insignificant equity interest in the fund as general partner.
+Added: As a result, the Company is considered to be acting in the capacity of a principal of the sponsored private fund and is therefore the primary beneficiary of the fund.
+Added: The Company’s exposure is limited to the value of its outstanding investment in the consolidated private funds of $ 94.7 million at December 31, 2022 and $ 53.1 million at December 31, 2021.
+Added: The liabilities of the consolidated funds may only be settled using assets of the consolidated funds, and the Company, as general partner, is not obligated to provide any financial support to the consolidated private funds.
+Added: At December 31, 2022 and December 31, 2021, the consolidated private funds had total assets of $ 274.2 million and $ 230.6 million, respectively, and total liabilities of $ 79.6 million and $ 63.0 million, respectively, made up primarily of cash, marketable equity securities, unsettled trades, and other equity investment.
+Added: Unconsolidated Company-Sponsored Private Funds —The Company does not consolidate its sponsored private funds where it has insignificant direct equity interests or capital commitments to these funds as general partner.
+Added: The Company may invest alongside certain of its sponsored private funds through joint ventures between the Company and these funds, or the Company may have capital commitments to its sponsored private funds that are satisfied directly through the co-investment joint ventures as an affiliate of the general partner.
+Added: In these instances, the co-investment joint ventures are consolidated by the Company.
+Added: As the Company's direct equity interests in its sponsored private funds as general partner absorb insignificant variability, the Company is considered to be acting in the capacity of an agent of these funds and is therefore not the primary beneficiary of these funds.
+Added: The Company accounts for its equity interests in unconsolidated sponsored private funds under the equity method.
+Added: The Company's maximum exposure to loss is limited to the carrying value of its investment in the unconsolidated sponsored private funds, totaling $ 748.4 million at December 31, 2022 and $ 382.7 million at December 31, 2021, included in equity investments, and $ 1.0 million at December 31, 2022 and $ 45.4 million at December 31, 2021, included within assets held for disposition.
+Added: Securitizations
+Added: The Company previously securitized loans receivable and CRE debt securities using VIEs.
+Added: Upon securitization, the Company had retained beneficial interests in the securitization vehicles, usually in the form of equity tranches or subordinate securities.
+Added: The securitization vehicles were structured as pass-through entities that receive principal and interest on the underlying loans or debt securities and distribute those payments to the holders of the notes, certificates or bonds issued by the securitization vehicles.
+Added: The loans and debt securities were transferred into securitization vehicles such that these assets were restricted and legally isolated from the creditors of the Company, and therefore were not available to satisfy the Company's obligations but only the obligations of the securitization vehicles.
+Added: The obligations of the securitization vehicles did not have any recourse to the general credit of the Company and its other subsidiaries.
+Added: The Company also acquired securities issued by securitization trusts that are VIEs.
+Added: Unconsolidated Securitizations —The Company does not consolidate the assets and liabilities of CLOs or collateralized debt obligations ("CDOs") in which the Company has an interest but does not retain the collateral management function.
+Added: The Company’s exposure to loss is limited to its investment in these CLOs of $ 50.9 million at December 31, 2022, or CDOs of $ 30.2 million at December 31, 2021, previously presented as debt securities within assets held for disposition prior to disposition of the CDOs in February 2022 (Note 21).
+Added: Prior to the sale of NRF Holdco in February 2022, wholly-owned subsidiaries of NRF Holdco that were formed as statutory trusts, NorthStar Realty Finance Trust I through VIII (the “Trusts”), previously issued trust preferred securities ("TruPS") in private placement offerings and used the proceeds to purchase junior subordinated notes to evidence loans made to NRF Holdco.
+Added: The sole assets of the Trusts consisted of a like amount of junior subordinated notes issued by the Issuer at the time of the offerings (the "Junior Notes").
+Added: Neither the Company nor the OP was an obligor or guarantor on the Junior Notes or the TruPS.
+Added: The Company had owned all of the common stock of the Trusts but did not consolidate the Trusts as the holders of the preferred securities issued by the Trusts were the primary beneficiaries of the Trusts.
+Added: The Company had accounted for its interest in the Trusts under the equity method and its maximum exposure to loss was limited to its investment carrying value of $ 3.7 million at December 31, 2021.
+Added: The Trusts were recorded as equity investments and the junior subordinated notes as debt, both previously classified as held for disposition (Note 21) .
+Added: Earnings per Share
+Added: The following table provides the basic and diluted earnings per common share computations.
+Added: Year Ended December 31,
+Added: (In thousands, except per share data) 2022 2021 2020
+Added: Net income (loss) allocated to common stockholders
+Added: Loss from continuing operations $ ( 421,293 ) $ ( 216,823 ) $ ( 591,088 )
+Added: Loss from continuing operations attributable to noncontrolling interests 209,589 144,184 155,340
+Added: Loss from continuing operations attributable to DigitalBridge Group, Inc.
+Added: ( 211,704 ) ( 72,639 ) ( 435,748 )
+Added: Loss from discontinued operations attributable to DigitalBridge Group, Inc.
+Added: ( 110,093 ) ( 237,458 ) ( 2,240,011 )
+Added: Preferred stock repurchases/redemptions (Note 9)
+Added: 1,098 ( 4,992 ) —
+Added: Preferred dividends ( 61,567 ) ( 70,627 ) ( 75,023 )
+Added: Net loss attributable to common stockholders ( 382,266 ) ( 385,716 ) ( 2,750,782 )
+Added: Net income allocated to participating securities ( 34 ) — ( 1,250 )
+Added: Net loss allocated to common stockholders—basic ( 382,300 ) ( 385,716 ) ( 2,752,032 )
+Added: Interest expense attributable to convertible and exchangeable notes (1)
+Added: Net loss allocated to common stockholders—diluted $ ( 382,300 ) $ ( 385,716 ) $ ( 2,752,032 )
+Added: Weighted average common shares outstanding
+Added: Weighted average number of common shares outstanding—basic 154,495 122,864 118,389
+Added: Weighted average effect of dilutive shares (1)(2)(3)
+Added: Weighted average number of common shares outstanding—diluted 154,495 122,864 118,389
+Added: Income (loss) per share—basic
+Added: Loss from continuing operations $ ( 1.76 ) $ ( 1.21 ) $ ( 4.33 )
+Added: Loss from discontinued operations ( 0.71 ) ( 1.93 ) ( 18.92 )
+Added: Net loss attributable to common stockholders per common share—basic $ ( 2.47 ) $ ( 3.14 ) $ ( 23.25 )
+Added: Income (loss) per share—diluted
+Added: Loss from continuing operations $ ( 1.76 ) $ ( 1.21 ) $ ( 4.33 )
+Added: Loss from discontinued operations ( 0.71 ) ( 1.93 ) ( 18.92 )
+Added: Net loss attributable to common stockholders per common share—diluted $ ( 2.47 ) $ ( 3.14 ) $ ( 23.25 )
+Added: (1) With respect to the assumed conversion or exchange of the Company's outstanding senior notes, the following are excluded from the calculation of diluted earnings per share as their inclusion would be antidilutive:
+Added: (a) for the years ended December 31, 2022, 2021 and 2020, the effect of adding back interest expense of $ 16.6 million, $ 54.7 million and $ 29.9 million, respectively, and 12,901,700 , 33,849,100 and 21,869,600 of weighted average dilutive common share equivalents, respectively.
+Added: Also excluded from the calculation of diluted earnings per share was $ 133.2 million of debt extinguishment loss (Note 8) for the year ended December 31, 2022.
+Added: (2) The calculation of diluted earnings per share excludes the effect of the following as their inclusion would be antidilutive:
+Added: (a) class A common shares that are contingently issuable in relation to performance stock units (Note 15) with weighted average shares of 1,298,900 , 2,712,700 and 1,444,200 for the years ended December 31, 2022, 2021 and 2020, respectively;
+Added: and (b) class A common shares that are issuable to net settle the exercise of warrants (Note 10) with weighted average shares of 1,742,800 , 2,659,400 and 215,500 for the years ended December 31, 2022, 2021 and 2020, respectively.
+Added: (3) OP Units may be redeemed for registered or unregistered class A common stock on a one -for-one basis and are not dilutive.
+Added: At December 31, 2022, 2021 and 2020, 12,628,900 , 12,613,800 and 12,769,200 of OP Units, respectively, were not included in the computation of diluted earnings per share in the respective periods presented.
+Added: The following table presents the Company's fee income by type, excluding amounts classified as discontinued operations (Note 22).
+Added: Year Ended December 31,
+Added: (In thousands) 2022 2021 2020
+Added: Management fees
+Added: $ 169,922 $ 168,618 $ 78,421
+Added: Incentive fees
+Added: 2,751 5,034 4,899
+Added: Total fee income $ 172,673 $ 180,826 $ 83,355
+Added: Management Fees — The Company earns management fees for providing investment management services to its sponsored private funds and other investment vehicles, portfolio companies and managed accounts.
+Added: Management fees are calculated generally at contractual rates ranging from 0.2 % per annum to 1.5 % per annum of investors' committed capital during the commitment period of the vehicle, and thereafter, contributed or invested capital;
+Added: or net asset value for vehicles in the Liquid Strategies.
+Added: Incentive Fees —The Company is entitled to incentive fees from sub-advisory accounts in its Liquid Strategies.
+Added: Incentive fees are determined based upon the performance of the respective accounts, subject to the achievement of specified return thresholds in accordance with the terms set out in their respective governing agreements.
+Added: A portion of the incentive fees earned by the Company is allocable to senior management, investment professionals, and certain other employees of the Company, included in carried interest and incentive fee compensation expense.
+Added: Other Fee Income —Other fees include primarily service fees for information technology, facilities and operational support provided to portfolio companies.
+Added: Equity-Based Compensation
+Added: The DigitalBridge Group, Inc.
+Added: 2014 Omnibus Stock Incentive Plan (the "Equity Incentive Plan") provides for the grant of restricted stock, performance stock units ("PSUs"), Long Term Incentive Plan ("LTIP") units, restricted stock units ("RSUs"), deferred stock units ("DSUs"), options, warrants or rights to purchase shares of the Company's common stock, cash incentives and other equity-based awards to the Company's officers, directors (including non-employee directors), employees, co-employees, consultants or advisors of the Company or of any parent or subsidiary who provides services to the Company.
+Added: Shares reserved for the issuance of awards under the Equity Incentive Plan are subject to equitable adjustment upon the occurrence of certain corporate events, provided that this number automatically increases each January 1st by 2 % of the outstanding number of shares of the Company’s class A common stock on the immediately preceding December 31st.
+Added: At December 31, 2022, an aggregate 21.3 million shares of the Company's class A common stock were reserved for the issuance of awards under the Equity Incentive Plan.
+Added: Restricted Stock — Restricted stock awards in the Company's class A common stock are granted to senior executives, directors and certain employees, generally subject to a service condition only, with annual time-based vesting in equal tranches over a three-year period.
+Added: Restricted stock is entitled to dividends declared and paid on the Company's class A common stock and such dividends are not forfeitable prior to vesting of the award.
+Added: Restricted stock awards are valued based on the Company's class A common stock price on grant date and equity-based compensation expense is recognized on a straight-line basis over the requisite service period.
+Added: Restricted Stock Units — RSUs in the Company's class A common stock are subject to a performance condition.
+Added: Vesting of performance-based RSUs occur upon achievement of certain Company-specific metrics over a performance measurement period that coincides with the recipients' term of service.
+Added: Only vested RSUs are entitled to accrued dividends declared and paid on the Company's class A common stock during the time period the RSUs are outstanding.
+Added: Fair value of RSUs are based on the Company's class A common stock price on grant date.
+Added: Equity-based compensation expense is recognized when it becomes probable that the performance condition will be met.
+Added: Performance Stock Units — PSUs are granted to senior executives and certain employees, and are subject to both a service condition and a market condition.
+Added: Following the end of the measurement period, the recipients of PSUs who remain employed will vest in, and be issued a number of shares of the Company's class A common stock, generally ranging from 0 % to 200 % of the number of PSUs granted and determined based upon the performance of the Company's class A common stock relative to that of a specified peer group over a three-year measurement period (such measurement metric the "total shareholder return").
+Added: In addition, recipients of PSUs whose employment is terminated after the first anniversary of their PSU grant are eligible to vest in a portion of the PSU award following the end of the measurement period based upon achievement of the total shareholder return metric applicable to the award.
+Added: PSUs also contain dividend equivalent rights which entitle the recipients to a payment equal to the amount of dividends that would have been paid on the shares that are ultimately issued at the end of the measurement period.
+Added: Fair value of PSUs, including dividend equivalent rights, was determined using a Monte Carlo simulation under a risk-neutral premise, with the following assumptions:
+Added: 2022 PSU Grants 2021 PSU Grants 2020 PSU Grants
+Added: Expected volatility of the Company's class A common stock (1)
+Added: 32.4 % 35.4 % 34.1 %
+Added: Expected annual dividend yield (2)
+Added: 0.0 % 0.0 % 9.3 %
+Added: Risk-free rate (per annum) (3)
+Added: 2.0 % 0.3 % 0.4 %
+Added: (1) Based upon the historical volatility of the Company's stock and those of a specified peer group.
+Added: (2) Based upon the Company's expected annualized dividends.
+Added: Expected dividend yield was zero for the March 2022 and 2021 PSU awards as common dividends were suspended beginning the second quarter of 2020 and reinstated in the third quarter of 2022.
+Added: (3) Based upon the continuously compounded zero-coupon U.S.
+Added: Treasury yield for the term coinciding with the measurement period of the award as of valuation date.
+Added: Fair value of PSU awards, excluding dividend equivalent rights, is recognized on a straight-line basis over their measurement period as compensation expense, and is not subject to reversal even if the market condition is not achieved.
+Added: The dividend equivalent right is accounted for as a liability-classified award.
+Added: The fair value of the dividend equivalent right is recognized as compensation expense on a straight-line basis over the measurement period, and is subject to adjustment to fair value at each reporting period.
+Added: LTIP Units — LTIP units are units in the Operating Company that are designated as profits interests for federal income tax purposes.
+Added: Unvested LTIP units that are subject to market conditions do not accrue distributions.
+Added: Each vested LTIP unit is convertible, at the election of the holder (subject to capital account limitation), into one common OP Unit and upon conversion, subject to the redemption terms of OP Units (Note 9).
+Added: LTIP units issued have either (1) a service condition only, valued based upon the Company's class A common stock price on grant date;
+Added: or (2) both a service condition and a market condition based upon the Company's class A common stock achieving a target price over a predetermined measurement period, subject to continuous employment to the time of vesting, and valued using a Monte Carlo simulation.
+Added: The following assumptions were applied in the Monte Carlo model under a risk-neutral premise:
+Added: 2022 LTIP Grant 2019 LTIP Grant (1)
+Added: Expected volatility of the Company's class A common stock (2)
+Added: 34.0 % 28.3 %
+Added: Expected dividend yield (3)
+Added: Risk-free rate (per annum) (4)
+Added: (1) Represents 2.5 million LTIP units granted to the Company's Chief Executive Officer, Marc Ganzi, in connection with the Company's acquisition of Digital Bridge Holdings, LLC in July 2019, with vesting based upon achievement of the Company's class A common stock price closing at or above $ 40 over any 90 consecutive trading days prior to the fifth anniversary of the grant date.
+Added: (2) Based upon historical volatility of the Company's stock and those of a specified peer group.
+Added: (3) Based upon the Company's most recently issued dividend prior to grant date and closing price of the Company's class A common stock on grant date.
+Added: Expected dividend yield was zero for the June 2022 award as common dividends were suspended beginning the second quarter of 2020 and reinstated in the third quarter of 2022.
+Added: (4) Based upon the continuously compounded zero-coupon US Treasury yield for the term coinciding with the measurement period of the award as of valuation date.
+Added: Equity-based compensation cost on LTIP units is recognized on a straight-line basis either over (1) the service period for awards with a service condition only;
+Added: or (2) the derived service period for awards with both a service condition and a market condition, irrespective of whether the market condition is satisfied.
+Added: The derived service period is a service period that is inferred from the application of the simulation technique used in the valuation of the award, and represents the median of the terms in the simulation in which the market condition is satisfied.
+Added: Deferred Stock Units — Certain non-employee directors may elect to defer the receipt of annual base fees and/or restricted stock awards, and in lieu, receive awards of DSUs.
+Added: DSUs awarded in lieu of annual base fees are fully vested on their grant date, while DSUs awarded in lieu of restricted stock awards vest one year from their grant date.
+Added: DSUs are entitled to a dividend equivalent, in the form of additional DSUs based on dividends declared and paid on the Company's class A common stock, subject to the same restrictions and vesting conditions, where applicable.
+Added: Upon separation of service from the Company, vested DSUs will be settled in shares of the Company’s class A common stock.
+Added: Fair value of DSUs are determined based on the price of the Company's class A common stock on grant date and recognized immediately if fully vested upon grant, or on a straight-line basis over the vesting period as equity based compensation expense and equity.
+Added: Equity-based compensation cost, excluding amounts related to businesses presented as discontinued operations (Note 22), is included in the following line items on the consolidated statement of operations.
+Added: Separately, additional compensation expense was also recorded in connection with the DataBank recapitalization transaction, as described in Note 10.
+Added: Year Ended December 31,
+Added: (In thousands)
+Added: 2022 2021 2020
+Added: Compensation expense (including $( 410 ) net reversal, $ 1,194 and $ 568 expense related to dividend equivalent rights)
+Added: $ 33,441 $ 38,268 $ 22,892
+Added: Administrative expense 1,422 222 —
+Added: $ 34,863 $ 38,490 $ 22,892
+Added: In 2022, the amended employment agreements for certain senior executives provided for continued vesting of their outstanding equity awards notwithstanding the expiration of their employment term.
+Added: This modification resulted in a revaluation of their equity awards, which decreased cumulative compensation expense recognized by $ 3.3 million.
+Added: There were no equity award modifications in connection with continuing operations in 2021 and 2020.
+Added: Changes in the Company’s unvested equity awards are summarized below, after giving effect to the Company's one-for-four reverse stock split in August 2022.
+Added: Weighted Average
+Added: Grant Date Fair Value
+Added: Restricted Stock LTIP Units (1)
+Added: DSUs RSUs (2)
+Added: Total PSUs All Other Awards
+Added: Unvested shares and units at December 31, 2021
+Added: 2,047,566 2,615,314 25,437 2,397,391 2,621,850 9,707,558 $ 14.74 $ 10.05
+Added: Granted 1,154,652 125,000 61,079 — 185,674 1,526,405 30.48 24.52
+Added: Vested ( 1,465,812 ) ( 115,314 ) ( 66,458 ) — ( 382,589 ) ( 2,030,173 ) 17.48 18.28
+Added: Forfeited ( 29,732 ) — — — ( 535,348 ) ( 565,080 ) 7.31 26.03
+Added: Unvested shares and units at December 31, 2022
+Added: 1,706,674 2,625,000 20,058 2,397,391 1,889,587 8,638,710 17.84 10.84
+Added: (1) Represents the number of LTIP units granted subject to vesting upon achievement of market condition.
+Added: LTIP units that do not meet the market condition within the measurement period will be forfeited.
+Added: (2) Represents the number of RSUs granted subject to vesting upon achievement of performance condition.
+Added: RSUs that do not meet the performance condition at the end of the measurement period will be forfeited.
+Added: (3) Number of PSUs granted does not reflect potential increases or decreases that could result from the final outcome of the total shareholder return measured at the end of the performance period.
+Added: PSUs for which the total shareholder return was not met at the end of the performance period are forfeited.
+Added: Fair value of equity awards that vested, determined based upon their respective fair values at vesting date, was $ 53.9 million in 2022, $ 68.3 million in 2021 and $ 17.9 million in 2020.
+Added: At December 31, 2022, aggregate unrecognized compensation cost for all unvested equity awards was $ 39.5 million, which is expected to be recognized over a weighted average period of 1.6 years.
+Added: This excludes $ 18.8 million of unvested RSUs that are not currently probable of achieving their performance conditions and have a remaining performance measurement period of 1.4 years.
+Added: Awards Granted by Managed Companies
+Added: Prior to the termination of the Company’s management agreement with BRSP on April 30, 2021, BRSP granted equity awards to the Company and certain of the Company's employees ("managed company awards") that typically vest over a three-year period, subject to service conditions.
+Added: Generally, the Company granted the managed company awards that it received in its capacity as manager to its employees with substantially the same terms and service requirements.
+Added: Such grants were made at the discretion of the Company, and the Company may consult with the board of directors or compensation committee of BRSP as to final allocation of awards to its employees.
+Added: Managed company awards granted to the Company, pending grant by the Company to its employees, are recognized based upon their fair value at grant date as other asset and other liability on the consolidated balance sheet.
+Added: The deferred revenue liability is amortized into other income as the awards vest to the Company.
+Added: Managed company awards granted to employees, either directly or through the Company, are recorded as other asset and other liability, and amortized on a straight-line basis as equity-based compensation expense and as other income, respectively, as the awards vest to the employees.
+Added: The other asset and other liability associated with managed
+Added: company awards granted to employees are subject to adjustment to fair value at each reporting period, with changes reflected in equity-based compensation and other income, respectively.
+Added: The BRSP equity awards granted by the Company to its employees fully vested and accelerated upon termination of the management contract in April 2021.
+Added: Equity-based compensation expense related to managed company awards was $ 5.3 million in 2021 and $ 2.1 million in 2020, with a corresponding amount recognized in other income, all of which were reflected in discontinued operations (Note 22).
+Added: Transactions with Affiliates
+Added: Affiliates include (i) private funds and other investment vehicles that the Company manages or sponsors, and in which the Company may have an equity interest or co-invests with;
+Added: (ii) the Company's investments in unconsolidated ventures;
+Added: and (iii) directors, senior executives and employees of the Company (collectively, "employees").
+Added: Amounts due from and due to affiliates consist of the following, excluding amounts related to discontinued operations that are presented as assets held for disposition (Note 21):
+Added: (In thousands) December 31, 2022 December 31, 2021
+Added: Due from Affiliates
+Added: Investment vehicles, portfolio companies and unconsolidated ventures
+Added: Fee income $ 35,010 $ 41,859
+Added: Cost reimbursements and recoverable expenses 7,031 7,317
+Added: Employees and other affiliates 3,319 54
+Added: $ 45,360 $ 49,230
+Added: Due to Affiliates (Note 7)
+Added: Investment vehicles—Derivative obligation $ 11,793 $ —
+Added: Employees and other affiliates 658 —
+Added: Significant transactions with affiliates include the following:
+Added: Fee Income —Fee income earned from investment vehicles that the Company manages and/or sponsors, and may have an equity interest or co-investment, are presented in Note 14, except for amounts included within discontinued operations (Note 22) and assets held for disposition (Note 21).
+Added: Substantially all fee income are from affiliates, other than primarily fees from sub-advisory accounts.
+Added: Cost Reimbursements and Recoverable Expenses — The Company receives reimbursements and recovers certain costs paid on behalf of investment vehicles sponsored by the Company, which include:
+Added: (i) organization and offering costs related to the formation and capital raising of the investment vehicles up to specified thresholds;
+Added: (ii) costs incurred in performing investment due diligence;
+Added: and (iii) direct and indirect operating costs for managing the operations of certain investment vehicles.
+Added: Such cost reimbursements and recoverable expenses, included in other income, totaled $ 4.3 million in 2022, $ 10.2 million in 2021 and $ 8.8 million in 2020.
+Added: Separately, reimbursements of direct and indirect operating costs for managing the operations of BRSP prior to termination of the BRSP management agreement in April 2021 were reflected in other income within discontinued operations (Note 22).
+Added: Warehoused Investments— The Company may acquire and temporarily warehouse investments on behalf of prospective sponsored investment vehicles that are actively fundraising.
+Added: The warehoused investments are transferred to the investment vehicle when sufficient third party capital, including debt, is raised.
+Added: The Company is generally paid a fee by the investment vehicle, akin to an interest charge, typically calculated as a percentage of the acquisition price of the investment, to compensate the Company for its cost of holding the investment during the warehouse period.
+Added: The terms of such arrangements may differ for each sponsored investment vehicle or by investment.
+Added: In the second half of 2022, the Company transferred all of its warehoused loans and the investment in TowerCo to its new sponsored funds and received an aggregate return of capital of $ 413.2 million, inclusive of holding fees.
+Added: Derivative Obligations of Sponsored Fund— In the third quarter of 2022, the Company, in its capacity as general partner and for the benefit of its sponsored fund, entered into foreign currency forward contracts to economically hedge the foreign currency exposure of an investment commitment of its sponsored fund (Note 11).
+Added: The investment committee of the sponsored fund has ratified the fund's responsibility and obligation to assume all resulting liabilities and benefits from
+Added: the foreign currency contracts effective from trade date through the novation of the contracts to the fund, which occurred in January 2023.
+Added: At December 31, 2022, the foreign currency contracts were in an unrealized gain position.
+Added: The Company recorded a payable in due to affiliates to reflect the fund's obligation to assume the resulting asset from the foreign currency contracts, with a corresponding loss recorded in the consolidated income statement.
+Added: Accordingly, there is no net effect to the Company's earnings resulting from these foreign currency contracts.
+Added: Digital Real Estate Acquisitions— Marc Ganzi, Chief Executive Officer of the Company, and Ben Jenkins, President and Chief Investment Officer of the Company, were former owners of Digital Bridge Holdings, LLC ("DBH") prior to its merger into the Company in July 2019.
+Added: Ganzi and Jenkins had retained their equity investments and general partner interests in the portfolio companies of DBH, which include DataBank and Vantage.
+Added: As a result of the personal investments made by Messrs.
+Added: Ganzi and Jenkins in DataBank and Vantage SDC prior to the Company’s acquisition of DBH, additional investments made by the Company in DataBank and Vantage SDC subsequent to their initial acquisitions may trigger future carried interest payments to Messrs.
+Added: Ganzi and Jenkins upon the occurrence of future realization events.
+Added: Such investments made by the Company include ongoing payments for the build-out of expansion capacity, including lease-up of the expanded capacity and existing inventory, in Vantage SDC (Note 3) and the acquisition of additional interest in DataBank from an existing investor in January 2022.
+Added: Carried Interest Allocation from Sponsored Investment Vehicles —With respect to investment vehicles sponsored by the Company for which Messrs.
+Added: Ganzi and Jenkins are invested in their capacity as former owners of DBH, and not in their capacity as employees of the Company, any carried interest entitlement attributed to such investments by Messrs.
+Added: Ganzi and Jenkins as general partner are not subject to continuing vesting provisions and do not represent compensatory arrangements to the Company.
+Added: Such carried interest allocation to Messrs.
+Added: Ganzi and Jenkins that are unrealized or realized but unpaid are included in noncontrolling interests on the balance sheet, in the amount of $ 70.4 million at December 31, 2022 and $ 20.8 million at December 31, 2021.
+Added: Carried interest allocated is recorded as net income attributable to noncontrolling interests totaling $ 65.0 million in 2022, $ 17.6 million in 2021 and $ 3.2 million in 2020.
+Added: Additionally, in connection with the DataBank recapitalization (Note 10), Messrs.
+Added: Ganzi and Jenkins received realized carried interest in the form of equity interest in vehicles that invest in DataBank, of which $ 86.1 million in aggregate is not deemed a compensatory arrangement.
+Added: Such equity interest represent noncontrolling interests in DataBank.
+Added: A portion of such equity interest was sold by Messrs.
+Added: Ganzi and Jenkins in connection with the recapitalization transaction.
+Added: Investment in Managed Investment Vehicles —Subject to the Company's related party policies and procedures, senior management, investment professionals and certain other employees may invest on a discretionary basis in investment vehicles sponsored by the Company, either directly in the vehicle or indirectly through the general partner entity.
+Added: These investments are generally not subject to management fees, but otherwise bear their proportionate share of other operating expenses of the investment vehicles.
+Added: Such investments in consolidated investment vehicles and general partner entities totaled $ 17.7 million at December 31, 2022 and $ 19.5 million at December 31, 2021, reflected in redeemable noncontrolling interests and noncontrolling interests on the balance sheet.
+Added: Their share of net income was $ 2.2 million in 2022, $ 2.1 million in 2021 and $ 0.8 million in 2020.
+Added: These amounts are reflected in net income (loss) attributable to noncontrolling interests and exclude their share of carried interest allocation, which is reflected in compensation expense (reversal)—carried interest.
+Added: Aircraft— P ursuant to Mr.
+Added: Ganzi’s employment agreement, as amended, the Company has agreed to reimburse Mr.
+Added: Ganzi for certain variable operational costs of business travel on a chartered or private jet (including any aircraft that Mr.
+Added: Ganzi may partially or fully own), provided that the Company will not reimburse the allocable share (based on the number of passengers) of variable operational costs for any passenger on such flight who is not traveling on Company business.
+Added: Additionally, the Company has also agreed to reimburse Mr.
+Added: Ganzi for certain defined fixed costs of any aircraft owned by Mr.
+Added: The fixed cost reimbursements will be made based on an allocable portion of an aircraft’s annual budgeted fixed cash operating costs, based on the number of hours the aircraft will be used for business purposes.
+Added: At least once a year, the Company will reconcile the budgeted fixed operating costs with the actual fixed operating costs of the aircraft, and the Company or Mr.
+Added: Ganzi, as applicable, will make a payment for any difference.
+Added: The Company reimbursed Mr.
+Added: Ganzi $ 2.7 million in 2022, $ 3.0 million in 2021 and $ 1.8 million in 2020.
+Added: Investment Venture— Pursuant to an investment agreement entered into between a subsidiary of the Company and Thomas J.
+Added: Barrack, the Company's former Executive Chairman, effective April 1, 2021, the Company invested $ 26.0 million in Mr.
+Added: Barrack's newly formed investment entity (the “Venture”), which entitles the Company to a portion of carried interest payable to Mr.
+Added: Barrack from the Venture.
+Added: Following subsequent events which significantly reduced the likelihood that fundraising by the Venture will sufficiently support its value, the Company determined that its investment would likely not be recoverable and wrote off its investment as of June 30, 2021.
+Added: Advancement of Expenses— Effective April 1, 2021, Mr.
+Added: Barrack stepped down as Executive Chairman of the Company and in July 2021, resigned as a member of the Company's Board of Directors.
+Added: In October 2021, the Company entered into an Agreement Regarding Advancement of Certain Expenses ("Advancement Agreement") with Mr.
+Added: Barrack, which is generally consistent with the Company’s obligations and Mr.
+Added: Barrack’s rights regarding advancement of expenses under the terms of a January 2017 Indemnification Agreement between the Company and Mr.
+Added: Barrack, and under the Company’s Bylaws.
+Added: The Advancement Agreement (a) memorializes the parties’ disagreement as to the Company’s obligations and Mr.
+Added: Barrack’s rights under the earlier Indemnification Agreement and the Company's Bylaws, and (b) obligates Mr.
+Added: Barrack to reimburse the Company for such advanced expenses under certain circumstances.
+Added: Pursuant to the Advancement Agreement, the Company expensed $ 27.6 million in 2022 and $ 5.6 million in 2021.
+Added: As discussed in Note 1, commencing with the taxable year ended December 31, 2022, the Company is taxed as a C Corporation, except for subsidiaries that have elected or anticipate electing REIT status.
+Added: Given the availability of significant capital loss and NOL carryforwards, the Company’s transition from a REIT to a taxable C Corporation, in and of itself, did not result in significant incremental current income tax expense in 2022.
+Added: The Company's primary source of income subject to tax remains its investment management business, which was already subject to tax previously through its TRS.
+Added: Income Tax Benefit (Expense)
+Added: The components of current and deferred tax benefit (expense), excluding amounts related to discontinued operations (Note 22), are as follows.
+Added: Year Ended December 31,
+Added: (In thousands) 2022 2021 2020
+Added: Federal $ 3,935 $ 3,355 $ ( 3,019 )
+Added: State and local ( 1,143 ) ( 20 ) ( 104 )
+Added: Foreign ( 864 ) ( 347 ) ( 327 )
+Added: Total current tax benefit (expense) 1,928 2,988 ( 3,450 )
+Added: Federal ( 13,734 ) 94,659 41,603
+Added: State and local ( 2,405 ) 2,491 8,910
+Added: Foreign 744 400 —
+Added: Total deferred tax benefit (expense) ( 15,395 ) 97,550 50,513
+Added: Income tax benefit (expense) on continuing operations $ ( 13,467 ) $ 100,538 $ 47,063
+Added: The Company has no income tax benefits recognized for uncertain tax positions.
+Added: Deferred Income Tax Asset and Liability
+Added: Deferred tax asset and deferred tax liability are presented within other assets, and accrued and other liabilities, respectively.
+Added: The components of deferred tax asset and deferred tax liability are as follows, excluding amounts in connection with assets held for disposition.
+Added: (In thousands) December 31, 2022 December 31, 2021
+Added: Deferred tax asset
+Added: Capital losses (1)
+Added: $ 252,904 $ —
+Added: Net operating losses (2)
+Added: 92,224 21,552
+Added: Investment in partnerships 317,048 —
+Added: Equity-based compensation 11,856 11,486
+Added: Real estate, leases and related intangible liabilities 3,987 14,853
+Added: Deferred income 2,086 535
+Added: Deferred interest expense 5,556 1,799
+Added: Lease liability—corporate offices
+Added: 16,130 19,295
+Added: Other 5,847 —
+Added: Gross deferred tax asset 707,638 69,520
+Added: Valuation allowance ( 679,057 ) ( 12,766 )
+Added: Deferred tax asset, net of valuation allowance 28,581 56,754
+Added: Deferred tax liability
+Added: Investment in partnerships — 22,399
+Added: Real estate, leases and related intangible assets 3,026 —
+Added: Other intangible assets 11,754 5,528
+Added: ROU lease asset—corporate offices
+Added: 11,376 14,274
+Added: Other 381 7,857
+Added: Gross deferred tax liability 26,537 50,058
+Added: Net deferred tax asset $ 2,044 $ 6,696
+Added: (1) At December 31, 2022, deferred tax asset was recognized on capital losses of $ 1.0 billion, which expire between 2024 and 2027, with full valuation allowance established.
+Added: (2) At December 31, 2022 and 2021, deferred tax asset was recognized on NOL of $ 378.7 million and $ 89.8 million, respectively, for which full valuation allowance was established in 2022 and partial in 2021.
+Added: NOL, which is largely attributable to U.S.
+Added: federal losses incurred after December 31, 2017, can be carried forward indefinitely.
+Added: Valuation Allowance
+Added: Changes in the deferred tax asset valuation allowance are presented below, which include activities classified as continuing and discontinued operations:
+Added: Year Ended December 31,
+Added: (In thousands) 2022 2021 2020
+Added: Beginning balance $ 12,766 $ 1,852 $ —
+Added: Addition 666,291 33,756 1,852
+Added: Utilization, expiration and/or reversal — ( 22,842 ) —
+Added: Ending balance $ 679,057 $ 12,766 $ 1,852
+Added: In 2022, significant deferred tax assets were recognized with an offsetting valuation allowance.
+Added: As a result of the Company's transition to a taxable C Corporation, $ 400.2 million of deferred tax asset was recognized as of January 1, 2022 related principally to capital loss carryforwards and outside basis difference in DBRG's interest in the OP, and $ 134.2 million was recorded during the year related to changes in DBRG’s interest in the OP that were treated as equity transactions.
+Added: Outside basis difference in investment in partnerships along with NOL generated by a subsidiary during the year further contributed to the deferred tax asset balance in 2022.
+Added: At December 31, 2022, it was determined that the realizability of these deferred tax assets did not meet the more-likely-than-not threshold, and consequently, a full valuation allowance was established against these deferred tax assets.
+Added: In assessing realizability, the Company determined that there were no prudent and feasible tax planning strategies that the Company could employ to reasonably assure the future realizability of its carryforward losses and other deferred tax assets.
+Added: In the absence of tax planning strategies and given the Company’s history of cumulative operating losses, which was largely a product of the recent transition in the Company's business, it was difficult to overcome the resulting uncertainties over the Company’s ability to generate future taxable income to realize these deferred tax assets.
+Added: In future periods, if the realizability of all or some portion of these deferred tax assets becomes more likely than not, the associated valuation allowance would be reversed as a deferred tax benefit.
+Added: Foreign Subsidiary Earnings
+Added: The Company has evaluated all unremitted earnings of its foreign subsidiaries, which may be repatriated at the Company’s election, and has not recorded any deferred tax liability as no material taxes are expected to be due if and when these amounts are repatriated.
+Added: Effective Income Tax
+Added: The Company's income tax benefit attributable to continuing operations varied from the amount computed by applying the statutory income tax rate to loss from continuing operations before income taxes.
+Added: The following table presents a reconciliation of the statutory U.S.
+Added: income tax to the Company's effective income tax attributable to continuing operations:
+Added: Year Ended December 31,
+Added: (In thousands) 2022 2021 2020
+Added: Loss from continuing operations before income taxes $ ( 407,826 ) $ ( 317,361 ) $ ( 638,151 )
+Added: Loss from continuing operations before income taxes attributable to pass-through subsidiaries NA 198,180 386,352
+Added: Loss from continuing operations before income taxes attributable to taxable subsidiaries ( 407,826 ) ( 119,181 ) ( 251,799 )
+Added: Federal income tax benefit at statutory tax rate (21%) 85,643 25,028 52,878
+Added: State and local income taxes, net of federal income tax benefit 23,944 3,721 3,008
+Added: Foreign income tax differential 782 ( 86 ) —
+Added: Noncontrolling interests ( 44,014 ) — —
+Added: Separately taxable subsidiaries of OP 21,226 — —
+Added: Change in ownership of OP, including equity reallocation (Note 2) ( 2,838 ) — —
+Added: Equity-based compensation 1,971 1,814 ( 4,121 )
+Added: DataBank REIT election — 79,547 —
+Added: Valuation allowance (1)
+Added: ( 95,344 ) ( 10,914 ) ( 1,852 )
+Added: Other, net ( 4,837 ) 1,428 ( 2,850 )
+Added: Income tax benefit (expense) on continuing operations $ ( 13,467 ) $ 100,538 $ 47,063
+Added: (1) Excludes changes in valuation allowance related to the Company's transition to taxable C Corporation as of January 1, 2022, outside basis difference in changes in DBRG’s interest in the OP that were treated as equity transactions, and other activities associated with discontinued operations.
+Added: In 2021, the Company's DataBank subsidiary completed a restructuring of its operations to qualify as a REIT and elected REIT status for U.S.
+Added: federal income tax purposes for the 2021 taxable year.
+Added: As a result, DataBank recorded a net deferred tax benefit of $ 66.8 million in 2021, reflecting principally the write-off of its deferred tax liabilities.
+Added: As a REIT, DataBank is generally not subject to U.S.
+Added: federal income taxes on its taxable income to the extent that it annually distributes such taxable income to its stockholders and maintains certain asset and income requirements.
+Added: However, DataBank continues to be subject to U.S.
+Added: federal income taxes on income earned by its taxable subsidiaries.
+Added: Tax Examinations
+Added: The Company is no longer subject to new income tax examinations by tax authorities for years prior to 2018 .
+Added: Segment Reporting
+Added: The Company conducts its business through two reportable segments:
+Added: (i) Investment Management (formerly, Digital Investment Management);
+Added: and (ii) Operating (formerly, Digital Operating), the Company's direct co-investment in digital infrastructure assets held by its portfolio companies.
+Added: • Investment Management — This segment represents the Company's global investment management platform, deploying and managing capital on behalf of a diverse base of global institutional investors.
+Added: The Company's investment management platform is composed of a growing number of long-duration, private investment funds designed to provide institutional investors access to investments across different segments of the digital infrastructure ecosystem.
+Added: In addition to its flagship value-add digital infrastructure equity offerings, the Company's investment offerings have expanded to include core equity, credit and liquid securities.
+Added: The Company earns management fees based upon the assets or capital managed in investment vehicles, and may earn incentive fees and carried interest based upon the performance of such investment vehicles, subject to achievement of minimum return hurdles.
+Added: The amount of incentive fees and carried interest recognized, a portion of which is allocated to employees, may be highly variable from period to period.
+Added: Through the end of May 2022, earnings from the Investment Management segment were attributed 31.5% to Wafra prior to the Company's redemption of Wafra's interest in the investment management business (as discussed further in Note 10).
+Added: • Operating— This segment is composed of balance sheet equity interests in digital infrastructure and real estate operating companies, which generally earn rental income from providing use of digital asset space and/or capacity through leases, services and other agreements.
+Added: The Company currently owns interests in two companies:
+Added: DataBank, an edge colocation data center business (DBRG ownership of 11% at December 31, 2022 and 20% at December 31, 2021);
+Added: and Vantage SDC, a stabilized hyperscale data center business (DBRG ownership of 13% at December 31, 2022 and 2021).
+Added: DataBank and Vantage SDC are portfolio companies managed by the Company under its Investment Management segment with respect to equity interests owned by third party capital.
+Added: The Company's remaining investment activities and corporate level activities are presented as Corporate and Other.
+Added: • Other investment activities are composed of the Company's equity interests in:
+Added: (i) digital investment vehicles, the largest of which is in the DBP flagship funds, and seed investments in liquid securities and other potential new strategies;
+Added: and (ii) remaining non-digital investments, primarily in BRSP.
+Added: Outside of its general partner interests, the Company's other equity interests in its sponsored and/or managed digital investment vehicles are considered to be incidental to its investment management business.
+Added: The primary economics to the Company are represented by fee income and carried interest as general partner and/or manager, rather than economics from its equity interest in the investment vehicles as a limited partner or equivalent.
+Added: With respect to seed investments, these are not intended to be a long-term deployment of capital by the Company and are expected to be warehoused temporarily on the Company's balance sheet until sufficient third party capital has been raised.
+Added: At this time, the remaining non-digital investments are not substantially available for immediate sale and are expected to be monetized over an extended period beyond the near term.
+Added: These other investment activities generate largely equity method earnings or losses and to a lesser extent, revenues in the form of interest income or dividend income from warehoused investments and consolidated investment vehicles.
+Added: Effective the third quarter of 2021, these activities are no longer presented separately as the Digital Other and Other segments, which is consistent with and reflects management's focus on its core digital operations and overall simplification of the Company's business.
+Added: This change in segment presentation is reflected retrospectively.
+Added: • Corporate activities include corporate level cash and corresponding interest income, corporate level financing and related interest expense, corporate level transaction costs, costs in connection with unconsummated investments, income and expense related to cost reimbursement arrangements with affiliates, fixed assets for administrative use, compensation expense not directly attributable to reportable segments, corporate level administrative and overhead costs, and adjustments to eliminate intercompany fees.
+Added: Costs which are directly attributable, or otherwise can be subjected to a reasonable and systematic attribution, have been attributed to each of the reportable segments.
+Added: As segment results are presented before elimination of intercompany fees, elimination adjustment pertains to fee income earned by the Investment Management segment from third party capital in investment vehicles managed by the Company and consolidated within the Operating segment and in Corporate and Other.
+Added: Such adjustments amounted to $ 3.4 million, $ 6.6 million and $ 1.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
+Added: Segment Results of Operations
+Added: The following table summarizes results of operations of the Company's reportable segments, including reconciliation to the consolidated statement of operations.
+Added: (In thousands) Investment Management Operating Corporate and Other Total
+Added: Year Ended December 31, 2022
+Added: Total revenues $ 182,045 $ 884,874 $ 77,653 $ 1,144,572
+Added: Property operating expense — ( 376,255 ) ( 13,190 ) ( 389,445 )
+Added: Interest expense ( 10,872 ) ( 159,409 ) ( 28,217 ) ( 198,498 )
+Added: Investment expense and transaction costs ( 9,007 ) ( 24,338 ) ( 10,671 ) ( 44,016 )
+Added: Depreciation and amortization ( 22,155 ) ( 532,640 ) ( 22,116 ) ( 576,911 )
+Added: Compensation expense, including $ 202,286 of incentive fee and carried interest compensation
+Added: ( 303,719 ) ( 90,505 ) ( 53,319 ) ( 447,543 )
+Added: Administrative expense ( 21,515 ) ( 30,915 ) ( 70,754 ) ( 123,184 )
+Added: Other loss, net ( 3,341 ) ( 808 ) ( 166,406 ) ( 170,555 )
+Added: Equity method earnings, including carried interest 382,463 — 15,291 397,754
+Added: Income tax benefit (expense) ( 7,815 ) ( 335 ) ( 5,317 ) ( 13,467 )
+Added: Income (loss) from continuing operations 186,084 ( 330,331 ) ( 277,046 ) ( 421,293 )
+Added: Net income (loss) from continuing operations attributable to DigitalBridge Group, Inc.
+Added: 69,884 ( 53,178 ) ( 228,410 ) ( 211,704 )
+Added: Net loss from discontinued operations attributable to DigitalBridge Group, Inc.
+Added: Net loss attributable to DigitalBridge Group, Inc.
+Added: $ ( 321,797 )
+Added: Year Ended December 31, 2021
+Added: Total revenues $ 191,682 $ 763,199 $ 10,918 $ 965,799
+Added: Property operating expense — ( 316,178 ) — ( 316,178 )
+Added: Interest expense ( 4,766 ) ( 125,387 ) ( 56,796 ) ( 186,949 )
+Added: Investment expense and transaction costs ( 3,423 ) ( 21,835 ) ( 8,780 ) ( 34,038 )
+Added: Depreciation and amortization ( 26,736 ) ( 495,342 ) ( 17,617 ) ( 539,695 )
+Added: Compensation expense, including $ 65,890 of incentive fee and carried interest compensation
+Added: ( 136,945 ) ( 76,213 ) ( 88,717 ) ( 301,875 )
+Added: Administrative expense ( 21,683 ) ( 36,867 ) ( 50,940 ) ( 109,490 )
+Added: Other gain (loss), net 797 ( 1,293 ) ( 20,916 ) ( 21,412 )
+Added: Equity method earnings, including carried interest 101,811 — 124,666 226,477
+Added: Income tax benefit (expense) ( 9,822 ) 79,075 31,285 100,538
+Added: Income (loss) from continuing operations 90,915 ( 230,841 ) ( 76,897 ) ( 216,823 )
+Added: Net income (loss) from continuing operations attributable to DigitalBridge Group, Inc.
+Added: 51,531 ( 36,664 ) ( 87,506 ) ( 72,639 )
+Added: Net loss from discontinued operations attributable to DigitalBridge Group, Inc.
+Added: Net loss attributable to DigitalBridge Group, Inc.
+Added: $ ( 310,097 )
+Added: (In thousands) Investment Management Operating Corporate and Other Total
+Added: Year Ended December 31, 2020
+Added: Total revenues $ 85,782 $ 313,283 $ 17,365 $ 416,430
+Added: Property operating expense — ( 119,729 ) ( 105 ) ( 119,834 )
+Added: Interest expense — ( 77,976 ) ( 42,853 ) ( 120,829 )
+Added: Investment expense and transaction costs ( 204 ) ( 6,704 ) ( 11,925 ) ( 18,833 )
+Added: Depreciation and amortization ( 26,056 ) ( 210,188 ) ( 4,776 ) ( 241,020 )
+Added: Impairment loss ( 3,832 ) — ( 21,247 ) ( 25,079 )
+Added: Compensation expense, including $ 1,906 of incentive fee and carried interest compensation
+Added: ( 47,959 ) ( 37,005 ) ( 93,094 ) ( 178,058 )
+Added: Administrative expense ( 9,724 ) ( 14,960 ) ( 54,082 ) ( 78,766 )
+Added: Settlement and other gain (loss), net 169 ( 245 ) ( 11,507 ) ( 11,583 )
+Added: Equity method earnings (losses), including carried interest 13,039 — ( 273,618 ) ( 260,579 )
+Added: Income tax benefit (expense) ( 60 ) 21,461 25,662 47,063
+Added: Income (loss) from continuing operations 11,155 ( 132,063 ) ( 470,180 ) ( 591,088 )
+Added: Net income (loss) from continuing operations attributable to DigitalBridge Group, Inc.
+Added: 10,423 ( 20,903 ) ( 425,268 ) ( 435,748 )
+Added: Net loss from discontinued operations attributable to DigitalBridge Group, Inc.
+Added: ( 2,240,011 )
+Added: Net loss attributable to DigitalBridge Group, Inc.
+Added: $ ( 2,675,759 )
+Added: Total assets and equity method investments of reportable segments, including reconciliation to the consolidated balance sheet, are summarized as follows:
+Added: December 31, 2022 December 31, 2021
+Added: (In thousands) Total Assets Equity Method Investments Total Assets Equity Method Investments
+Added: Investment Management $ 875,422 $ 393,414 $ 655,152 $ 140,027
+Added: Operating 8,149,171 — 7,608,451 —
+Added: Corporate and Other 1,946,384 576,840 2,257,598 533,069
+Added: 10,970,977 970,254 10,521,201 673,096
+Added: Assets held for disposition related to discontinued operations 57,526 54,495 3,676,615 182,552
+Added: $ 11,028,503 $ 1,024,749 $ 14,197,816 $ 855,648
+Added: Geographic information about the Company's total income from continuing operations and long-lived assets, excluding assets held for disposition, are as follows.
+Added: Geography is generally presented as the location in which the income producing assets reside or the location in which income generating services are performed.
+Added: Year Ended December 31,
+Added: (In thousands)
+Added: 2022 2021 2020
+Added: Total income by geography:
+Added: United States $ 1,494,713 $ 1,112,265 $ 382,920
+Added: Europe 58,548 18,147 1,442
+Added: Other 45,090 51,679 17,126
+Added: $ 1,598,351 $ 1,182,091 $ 401,488
+Added: (In thousands) December 31, 2022 December 31, 2021
+Added: Long-lived assets by geography:
+Added: United States $ 6,566,576 $ 5,792,711
+Added: Europe 95,217 109,555
+Added: Other 720,282 633,618
+Added: $ 7,382,075 $ 6,535,884
+Added: (1) Total income includes the Company's share of earnings and losses from its equity method investments, including carried interest, but excludes the Company's impairment of equity method investments of $ 60.4 million in 2022 and $ 254.5 million in 2020 (no impairment in 2021).
+Added: Total income excludes cost reimbursement income from affiliates (Note 16), presented within other income, and income from discontinued operations (Note 22).
+Added: (2) Long-lived assets include real estate held for investment, lease related intangible assets, operating lease right-of-use assets and fixed assets, and exclude financial instruments, goodwill, non-lease related intangible assets and assets held for disposition.
+Added: Commitments and Contingencies
+Added: The Company may be involved in litigation in the ordinary course of business.
+Added: As of December 31, 2022, the Company was not involved in any legal proceedings that are expected to have a material adverse effect on the Company’s results of operations, financial position or liquidity.
+Added: As lessee, the Company's leasing arrangements are composed of (i) leases on investment properties, consisting primarily of finance and operating leases on powered shell spaces for data centers, an air rights operating lease, lease on data center equipment, and operating ground leases;
+Added: and (ii) operating leases for corporate offices.
+Added: The weighted average remaining lease term based upon outstanding lease liability balances at December 31, 2022, excluding leases on investment properties held for disposition, was 10.4 years for finance leases on investment properties, 9.7 years for operating leases on investment properties and 5.7 years for operating leases on corporate offices.
+Added: The following table summarizes total lease cost for operating leases and finance leases, excluding leases on investment properties classified as discontinued operations.
+Added: Year Ended December 31,
+Added: 2022 2021 2020
+Added: (In thousands) Investment Properties Corporate Offices Investment Properties Corporate Offices Investment Properties Corporate Offices
+Added: Operating leases:
+Added: Fixed lease expense $ 69,292 $ 7,090 $ 63,356 $ 7,010 $ 18,456 $ 9,005
+Added: Variable lease expense 13,981 2,073 14,897 1,829 5,612 1,986
+Added: Total operating lease cost $ 83,273 $ 9,163 $ 78,253 $ 8,839 $ 24,068 $ 10,991
+Added: Finance leases:
+Added: Interest expense $ 8,519 NA $ 8,936 NA $ 414 NA
+Added: Amortization of ROU lease asset 11,648 NA 11,648 NA 475 NA
+Added: Total finance lease cost $ 20,167 NA $ 20,584 NA $ 889 NA
+Added: (1) Total lease cost for operating leases is included in property operating expense for investment properties and administrative expense for corporate offices.
+Added: Lease Commitments
+Added: Finance and operating lease liabilities take into consideration renewal or termination options when such options are deemed reasonably certain to be exercised by the Company and exclude variable lease payments which are expensed as incurred.
+Added: The Company makes variable lease payments for:
+Added: (i) leases with rental payments that are adjusted periodically for inflation, and/or (ii) nonlease services, such as common area maintenance and operating expenses, primarily for power, in data center leases.
+Added: The table below presents the Company's future lease commitments at December 31, 2022 , determined using weighted average discount rates of 6.2 % for finance leases on investment properties, 6.6 % for operating leases on investment properties, excluding properties held for disposition, and 4.9 % for operating leases on corporate offices:
+Added: (In thousands)
+Added: Finance Leases Operating Leases
+Added: Year Ending December 31, Investment Properties Investment Properties Corporate Offices
+Added: 2023 $ 15,942 $ 53,090 $ 8,709
+Added: 2024 16,332 51,519 8,934
+Added: 2025 16,735 41,053 8,071
+Added: 2026 17,312 37,711 7,346
+Added: 2027 17,773 36,760 6,402
+Added: 2028 and thereafter 101,782 232,882 7,423
+Added: Total lease payments 185,876 453,015 46,885
+Added: Present value discount ( 50,252 ) ( 167,082 ) ( 6,388 )
+Added: Finance / Operating lease liability
+Added: $ 135,624 $ 285,933 $ 40,497
+Added: Commitments on Future Leases
+Added: At December 31, 2022, the Company had operating lease commitments on two corporate office spaces commencing in 2023, including one assumed through the acquisition of InfraBridge in February 2023.
+Added: The fixed lease payments (undiscounted) total $ 21.4 million over a 9.7 year weighted average lease term.
+Added: Tenant Allowance
+Added: In connection with DataBank’s acquisition of a data center portfolio in March 2022 (Note 3), DataBank and the seller concurrently entered into a master lease agreement which provides that the seller leases from DataBank land acquired in the transaction.
+Added: If the seller does not exercise its rights to early terminate the lease, the seller is obligated to develop a data center facility on a portion of the acquired land and DataBank is committed to provide the seller a tenant allowance of up to $ 37.5 million to finance the construction.
+Added: In December 2022, the seller waived its right to terminate the lease with respect to the portion of the land subject to development.
+Added: The seller will be responsible for undertaking the construction and any resulting overages.
+Added: Title to the to-be constructed building, improvements and fixtures will be vested in the seller for the duration of the lease and transfers to DataBank thereafter.
+Added: The timing of funding of DataBank’s commitment to the seller will be based on agreed upon milestones, with construction to be completed no later than January 1, 2026.
+Added: DataBank expects to fund its commitment through future debt drawdowns.
+Added: Supplemental Disclosure of Cash Flow Information
+Added: Year Ended December 31,
+Added: (In thousands) 2022 2021 2020
+Added: Supplemental Disclosure of Cash Flow Information
+Added: Cash paid for interest, net of amounts capitalized of $ 3,206 , $ 1,567 and $ 852
+Added: $ 219,851 $ 444,365 $ 392,004
+Added: Cash received, net of cash paid, for income taxes 11,747 5,927 39,151
+Added: Operating lease payments 72,891 66,858 31,138
+Added: Finance lease payments 15,672 15,346 889
+Added: Supplemental Disclosure of Cash Flows from Discontinued Operations
+Added: Net cash provided by (used in) operating activities of discontinued operations $ ( 10,599 ) $ 175,782 $ 106,696
+Added: Net cash provided by (used in) investing activities of discontinued operations ( 23,375 ) 1,021,239 1,029,647
+Added: Net cash used in financing activities of discontinued operations ( 18,706 ) ( 658,831 ) ( 940,441 )
+Added: Supplemental Disclosure of Noncash Investing and Financing Activities
+Added: Dividends and distributions payable $ 16,491 $ 15,759 $ 18,516
+Added: Improvements in operating real estate in accrued and other liabilities 76,832 17,926 27,096
+Added: Receivable from loan repayments and asset sales 16,824 14,045 1,858
+Added: Operating lease right-of-use assets and lease liabilities established 28,328 31,032 262,169
+Added: Finance lease right-of-use assets and lease liabilities established — — 148,974
+Added: Redemption of OP Units for common stock 341 4,647 7,757
+Added: Redemption of redeemable noncontrolling interest for common stock 348,759 — —
+Added: Exchange of notes into shares of Class A common stock 60,317 161,261 —
+Added: Assets and liabilities of investment entities liquidated or conveyed to lender (1)
+Added: Assets consolidated from real estate acquisitions, net of cash and restricted cash — — 5,399,611
+Added: Liabilities assumed in real estate acquisitions — — 1,854,760
+Added: Noncontrolling interests assumed in real estate acquisitions — — 366,136
+Added: Debt assumed by buyer in sale of real estate — 44,148 —
+Added: Seller Note received in sale of NRF Holdco equity 154,992 — —
+Added: Loan receivable relieved in exchange for equity investment acquired 20,676 — —
+Added: Assets disposed in sale of equity of investment entities or sale by receiver
+Added: 4,689,188 5,263,443 395,351
+Added: Liabilities disposed in sale of equity of investment entities or sale by receiver
+Added: 3,948,016 4,291,557 235,425
+Added: Assets of investment entities deconsolidated (2)
+Added: — 351,022 80,921
+Added: Liabilities of investment entities deconsolidated (1)
+Added: Noncontrolling interests of investment entities sold or deconsolidated (2)
+Added: 415,098 1,080,134 —
+Added: (1) The Company indirectly conveyed the equity of certain of its wellness infrastructure borrower subsidiaries to an affiliate of the lender, which released the Company from all rights and obligations with respect to the assets and previously defaulted debt of these subsidiaries..
+Added: (2) Represents deconsolidation of noncontrolling interests upon sale of the Company's equity interests in investment entities (Note 22).
Assets and Related Liabilities Held for Disposition
Total assets and related liabilities held for disposition are summarized below, all of which relate to discontinued operations (Note 22).
−Removed: These assets and liabilities are composed of:
−Removed: (i) those held by NRF Holdco, predominantly related to Wellness Infrastructure assets and obligations, which were subsequently disposed in February 2022;
−Removed: (ii) prior to disposition in December 2021, OED investments and intangible assets of the Other IM business, both of which previously resided in the Other segment;
−Removed: and (iii) prior to disposition in March 2021, the Company's hotel business, with the remaining hotel portfolio that was in receivership sold by the lender in September 2021.
+Added: At December 31, 2022, these were composed of remaining equity investments excluded from the December 2021 OED sale.
+Added: At December 31, 2021, also included are assets and liabilities held by NRF Holdco, related primarily to the Wellness Infrastructure business prior to its sale in February 2022.
(In thousands) December 31, 2022 December 31, 2021
3 unchanged sentences
Equity and debt investments 57,387 250,246
−Removed: Goodwill, deferred leasing costs and other intangible assets, net 118,300 275,954
+Added: Deferred leasing costs and other intangible assets, net — 118,300
Other assets 139 100,720
5 unchanged sentences
Total liabilities related to assets held for disposition $ 380 $ 3,088,699
−Removed: (1) Represents debt related to assets held for disposition if the debt is expected to be assumed by the acquirer upon sale or if the debt is expected to be extinguished through lender's assumption of underlying collateral, and includes debt that is in receivership, in payment default or not in compliance with certain debt covenants.
−Removed: Includes the 5.375 % exchangeable senior notes and junior subordinated debt (as described in Note 14) which are obligations of NRF Holdco as the issuer.
+Added: (1) Represents debt related to assets held for disposition that was assumed by the acquirer upon sale of the assets.
+Added: At December 31, 2021 , included the 5.375 % exchangeable senior notes and junior subordinated debt (as described in Note 12) which were obligations of NRF Holdco as the issuer.
Nonrecurring Fair Value of Assets Classified as Held for Disposition and Discontinued Operations
2 unchanged sentences
For bulk sale transactions, the unit of account is the disposal group, with any excess of the aggregate carrying value over estimated fair value less costs to sell allocated to the individual assets within the group.
−Removed: The historical operating results of the Wellness Infrastructure, OED, Other IM and hotel businesses included in discontinued operations also include impairment charges recorded on individual assets prior to their classification as held for disposition, as determined when events or circumstances indicated that their carrying values may not be recoverable.
−Removed: Real Estate —Real estate classified as held for disposition and discontinued operations that have been written down and carried at fair value totaled $ 3.01 billion at December 31, 2021 and $ 4.71 billion at December 31, 2020, generally representing Level 3 fair value.
−Removed: Impairment of real estate and related intangibles held for disposition was $ 313.4 million, $ 1.96 billion and $ 347.8 million for the years ended December 31, 2021, 2020 and 2019, respectively, reflected in discontinued operations (Note 12).
−Removed: Properties written down to estimated fair value at the time they were classified as held for disposition were valued using either sales price, broker opinions of value, or third-party appraisals, and in certain cases, adjusted as deemed appropriate by management to account for inherent risk associated with specific properties, and also incorporating estimated closing adjustments.
−Removed: The impairment assessment in 2020 also factored in the economic effects of COVID-19 on real estate values.
−Removed: Fair value was generally reduced for estimated disposal costs, ranging from approximately 1 % to 3 % of the respective fair value.
−Removed: For properties that were impaired in 2020 and 2019 prior to being retrospectively classified as held for disposition and discontinued operations in 2021, impairment was attributed primarily to shortened hold period assumptions, particularly in the hotel and wellness infrastructure portfolios.
−Removed: This was driven by the Company's accelerated digital transformation in the second quarter of 2020, the risk that the Company was unable to obtain accommodation from lenders on non-recourse mortgage debt that was then in default or at risk of default, and/or to a lesser extent, decline in property operating results, in part from the economic effects of COVID-19.
−Removed: Fair value of these properties was estimated based upon:
−Removed: (i) third party appraisals, (ii) broker opinions of value with discounts applied based upon management judgment, (iii) income capitalization approach, using net operating income for each property and applying capitalization rates between 7.0 % and 12.0 %;
−Removed: or (iv) discounted cash flow analyses with terminal values determined using terminal capitalization rates between 5.75 % and 11.25 %, and discount rates between 6.5 % and 9.5 %.
−Removed: The Company considered the risk characteristics of the properties and adjusted the capitalization rates and/or discount rates as applicable.
−Removed: Goodwill —Upon termination of the BRSP management contract on April 30, 2021, the Other IM goodwill balance of $ 81.6 million was fully written off as the remaining value of the Other IM reporting unit represented principally the BRSP management contract.
−Removed: The receipt of a one-time termination payment of $ 102.3 million consequently resulted in a net gain of $ 20.7 million, recognized within other gain (loss) in discontinued operations (Note 12).
−Removed: The Company had previously recognized impairment loss on its Other IM goodwill in 2020 of $ 79.0 million and $ 515.0 million in the first and second quarters, respectively, and in 2019 of $ 387.0 million and $ 401.0 million in the third and fourth quarters, respectively.
−Removed: In 2020, in light of the economic effects of COVID-19 and the Company's acceleration of its digital transformation in the second quarter of 2020, both of which represented indicators of impairment, the Company's quantitative tests indicated that the carrying value of the Other IM reporting unit, including goodwill, was in excess of its estimated fair value at March 31, 2020 and at June 30, 2020.
−Removed: The remaining fair value of the Other IM reporting unit was determined to be principally in the BRSP management contract, as no value was ascribed to (a) the future capital raising potential of the non-digital credit and opportunity fund management business as it is no longer part of the Company's long-term strategy;
−Removed: and (b) the hypothetical contract of internally managing the Company's non-digital balance sheet assets following significant decreases in asset values in 2020.
−Removed: In 2019, impairment loss on the Other IM goodwill reflected:
−Removed: (a) loss of future fee income from sale of the Company's industrial business, and reduction in BRSP's fee base to reflect its reduced book value in the third quarter of 2019;
−Removed: and (b) beginning of the Company's transition to a digital focused investment management business in the fourth quarter of 2019.
−Removed: Investment Management Intangible Assets —In the first quarter of 2021, the remaining investor relationship intangible asset in Other IM was impaired by $ 4.0 million (Note 12) to a fair value of $ 5.5 million based upon estimated recoverable value in a monetization of the Other IM business.
−Removed: In 2020 and 2019, management contracts were impaired by $ 4.3 million and $ 8.6 million, respectively, to aggregate fair values of $ 8.4 million and $ 16.9 million, respectively, at the time of impairment.
−Removed: Fair value was based upon revised future net cash flows over the remaining life of the contracts, generally discounted at 10 %.
−Removed: Additionally, in the fourth quarter of 2019, an investor relationship intangible asset of $ 1.3 million was deemed to have no future value and was written off as the Company began to transition to a digital investment management strategy.
−Removed: All fair values were classified as Level 3.
−Removed: Equity Method Investments —Impairment on equity method investments classified as held for disposition and discontinued operations was $ 224.5 million, $ 237.5 million and $ 30.0 million in the years ended December 31, 2021, 2020 and 2019, respectively, reflected within equity method losses in discontinued operations (Note 12).
−Removed: Equity method investments that were impaired and written down to fair value in 2021 and 2020 totaled $ 19.7 million and $ 701.8 million, respectively, at the time of impairment, representing Level 3 fair value.
−Removed: Impairment was recorded based upon recoverable values for investments resolved or sold in 2019 and in 2021, including ADC loans accounted for as equity method
−Removed: Significant impairments were also recorded on these ADC loans in 2020, driven by then reduced cash flow streams expected from these investments, primarily taking into consideration a combination of lower land values, delayed leasing, and/or offer prices in the market, generally discounted at rates between 10 % to 20 %.
+Added: At December 31, 2022, there were no assets held for sale that were measured at fair value on a nonrecurring basis.
+Added: Impairment loss of $ 36.0 million was recorded in 2022 primarily based upon the final carrying value of net assets of the Wellness Infrastructure business upon closing of the disposition of NRF Holdco in February 2022.
+Added: At December 31, 2021, only real estate held for disposition that pertained to the Wellness Infrastructure business was carried at nonrecurring fair value, having been impaired $ 313.4 million during the year ended December 31, 2021 based upon the sales price for NRF Holdco.
+Added: Other assets that had been impaired during 2021 pertained to real estate, equity investments and intangible assets of the OED and Other IM portfolio that were disposed in December 2021.
Recurring Fair Value of Assets Classified as Held for Disposition and Discontinued Operations
−Removed: Equity Investments Carried at Net Asset Value —These are equity investments held for disposition that were valued based upon NAV, specifically interests in a Company-sponsored non-traded REIT and a private fund totaling $ 31.2 million at December 31, 2021, and additionally, including interest in a third party real estate private fund that has since been disposed, totaling $ 36.2 million at December 31, 2020.
−Removed: Equity Method Investments under Fair Value Option —Equity method investments under fair value option were classified as Level 3.
−Removed: Fair value totaling $ 79.3 million was measured based upon indicative sales price at December 31, 2021.
−Removed: At December 31, 2020, fair value totaling $ 153.3 million was determined using primarily appraised value of real estate assets of the investee, or the initial investment value was deemed to approximate fair value for an investee engaged in real estate development during the development stage.
−Removed: Loans Receivable under Fair Value Option —Fair value of all loans held for disposition were classified as Level 3.
−Removed: At December 31, 2021, the fair value of loans held for disposition of $ 55.9 million represent a component of the overall sales price for the pending disposition of NRF Holdco.
−Removed: At December 31, 2020, loans held for disposition totaling $ 1.26 billion were measured either at their selling price where applicable, by comparing the current yield to the estimated yield of newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment, or based upon discounted cash flow projections of principal and interest expected to be collected, which include, but are not limited to, consideration of the financial standing of the borrower or sponsor as well as operating results and/or value of the underlying collateral, applying discount rates between 6.9 % and 25.7 %.
−Removed: Loans that are 90 days or more past due as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status.
−Removed: Following the disposition of a majority of the OED investments in December 2021, there were no such loans at December 31, 2021.
−Removed: At December 31, 2020, these loans, which included distressed loan portfolios that were previously acquired by the Company at a discount, had a total fair value of $ 873.2 million and unpaid principal balance of $ 2.2 billion.
−Removed: Debt Securities —The Company's investment in debt securities is composed of AFS N-Star CDO bonds, which are subordinate bonds retained by NRF Holdco from its sponsored collateralized debt obligations ("CDOs"), and CDO bonds originally issued by NRF Holdco that it subsequently repurchased at a discount.
−Removed: These CDOs are collateralized primarily by commercial real estate debt and securities.
−Removed: The balance of N-Star CDO bonds, classified as Level 3 fair value, is summarized as follows.
+Added: Equity Investments Carried at NAV —These include equity interest in a private fund and prior to its disposition as part of NRF Holdco in February 2022, investment in a Company-sponsored non-traded REIT, amounting to $ 2.9 million at December 31, 2022 and $ 31.2 million at December 31, 2021.
+Added: Equity Method Investments under Fair Value Option —Equity method investments under the fair value option of $ 44.5 million at December 31, 2022 and $ 79.3 million at December 31, 2021 were measured based upon indicative sales price, classified as Level 3 fair value.
+Added: Loans Receivable under Fair Value Option —There were no loans held for disposition at December 31, 2022.
+Added: At December 31, 2021, the loan held for disposition represents a component of the overall sales price for NRF Holdco, which was disposed in February 2022.
+Added: Debt Securities —Prior to the sale of NRF Holdco in February 2022, the Company had investments in debt securities, composed of AFS N-Star CDO bonds, which were subordinate bonds retained by NRF Holdco in its sponsored CDOs.
+Added: The CDO bonds were collateralized primarily by commercial real estate debt and securities.
+Added: The balance of N-Star CDO bonds at December 31, 2021, classified as Level 3 fair value, is summarized as follows.
Amortized Cost without Allowance for Credit Loss
2 unchanged sentences
December 31, 2021 $ 55,041 $ ( 24,882 ) $ 6,372 $ — $ 36,531
−Removed: December 31, 2020 46,561 ( 24,688 ) 6,703 — 28,576
−Removed: At December 31, 2021, the fair value of N-Star CDO bonds represent a component of the overall sales price for the disposition of NRF Holdco.
−Removed: At December 31, 2020, the N-Star CDO bonds were valued based upon discounted cash flow projections of principal and interest expected to be collected, taking into consideration the Company's knowledge of the underlying collateral and recent trades, if any, within the securitizations, and applying discount rates between 18.3 % and 57.8 %.
−Removed: The Company recognized provision for credit loss of $ 0.2 million in 2021 and $ 24.7 million in 2020.
+Added: Prior to its sale, the fair value of N-Star CDO bonds represents a component of the overall sales price for the disposition of NRF Holdco.
+Added: There was no provision for credit loss in 2022 prior to disposition but $ 0.2 million was recognized in 2021.
Credit losses were determined based upon an analysis of the present value of contractual cash flows expected to be collected from the underlying collateral as compared to the amortized cost basis of the security.
1 unchanged sentence
The following table presents changes in recurring Level 3 fair value assets held for disposition.
−Removed: Realized and unrealized gains (losses) are included in AOCI for AFS debt securities, other gain (loss) for loans receivable and equity method losses for equity method investments, all of which were presented in discontinued operations (Note 12).
+Added: Realized and unrealized gains (losses) are included in AOCI for AFS debt securities, other gain (loss) for loans receivable and equity method losses for equity method investments, all of which are presented in discontinued operations (Note 22).
Fair Value Option
1 unchanged sentence
Fair value at December 31, 2020 $ 28,576 $ 1,258,539 $ 153,259
−Removed: Election of fair value option on January 1, 2020
−Removed: — 1,556,131 —
−Removed: Reclassification of accrued interest on January 1, 2020
Purchases, drawdowns, contributions and accretion 10,049 19,070 8
2 unchanged sentences
Allowance for credit losses
−Removed: ( 24,688 ) — —
Realized and unrealized losses in earnings, net — ( 92,701 ) ( 29,961 )
−Removed: Other comprehensive income (loss) (1)
+Added: Deconsolidation of investment entities (Note 20)
— ( 647,218 ) ( 27,402 )
+Added: Other — ( 7,088 ) —
+Added: Other comprehensive loss (1)
+Added: ( 331 ) ( 39,879 ) ( 4,001 )
Fair value at December 31, 2021 $ 36,531 $ 55,878 $ 79,309
4 unchanged sentences
Purchases, drawdowns, contributions and accretion
−Removed: 10,049 19,070 8
Paydowns, distributions and sales
1 unchanged sentence
Change in accrued interest and capitalization of paid-in-kind interest — ( 1,013 ) —
−Removed: Allowance for credit losses
Realized and unrealized losses in earnings, net — ( 375 ) ( 19,845 )
−Removed: Deconsolidation of investment entities (Note 22 )
−Removed: — ( 647,218 ) ( 27,402 )
−Removed: Other — ( 7,088 ) —
Other comprehensive loss (1)
4 unchanged sentences
In other comprehensive loss $ — N/A N/A
−Removed: (1) Amounts recorded in OCI for loans receivable and equity method investments represent foreign currency translation differences on the Company's foreign subsidiaries that hold the respective foreign currency denominated investments.
+Added: (1) Amounts recorded in OCI for loans receivable and equity method investments represent foreign currency translation of the Company's foreign subsidiaries that hold the respective foreign currency denominated investments.
Discontinued Operations
Discontinued operations represent the following:
−Removed: • Wellness Infrastructure —operations of the Wellness Infrastructure business, along with other non-core assets held by NRF Holdco, primarily:
−Removed: (i) the Company's equity interest in and management of NorthStar Healthcare, debt securities collateralized largely by certain debt and preferred equity within the capital structure of the Wellness Infrastructure portfolio, limited partnership interests in private equity real estate funds;
+Added: • Wellness Infrastructure —operations of the Wellness Infrastructure business, along with other non-core assets held by NRF Holdco prior to the sale of 100 % of the equity of NRF Holdco in February 2022.
+Added: The non-core assets held by NRF Holdco were composed primarily of:
+Added: (i) the Company's equity interest in and management of NorthStar Healthcare Income, Inc., debt securities collateralized largely by certain debt and preferred equity within the capital structure of the Wellness Infrastructure portfolio, limited partner interests in private equity real estate funds;
as well as (ii) the 5.375 % exchangeable senior notes, trust preferred securities and corresponding junior subordinated debt, all of which were issued by NRF Holdco who acts as guarantor.
−Removed: • Other —operations of substantially all of the OED investments and Other IM business that were previously in the Other segment prior to sale of the Company's equity interests and subsequent deconsolidation of these subsidiaries in December 2021.
−Removed: This is composed of various non-digital real estate, real estate-related equity and debt investments, general partner interests and management rights with respect to these assets, and underlying compensation and administrative costs for managing these assets.
+Added: The sales price for 100 % of the equity of NRF Holdco was $ 281 million, composed of $ 126 million cash and a $ 155 million unsecured promissory note (the "Seller Note").
+Added: In addition, NRF Holdco distributed approximately $ 35 million of cash to the Company prior to closing.
+Added: The Seller Note, which is classified as held for investment and carried at fair value under the fair value option, matures five years from closing of the sale, accruing paid-in-kind interest at 5.35 % per annum.
+Added: The sale included the acquirer's assumption of $ 2.57 billion of consolidated investment level debt on various healthcare portfolios in which the Company owned between 69.6 % and 81.3 %, and $ 293.7 million of debt at NRF Holdco.
+Added: • Other —operations of substantially all of the Company's OED investments and Other IM business that were previously in the Other segment prior to sale of the Company's equity interests and subsequent deconsolidation of these subsidiaries in December 2021.
+Added: The OED investments and Other IM business are composed of various non-digital real estate, real estate-related equity and debt investments, general partner interests and management rights with respect to these assets, and underlying compensation and administrative costs for managing these assets.
Also included in discontinued operations are the economics related to the management of BRSP prior to termination of its management contract in April 2021.
2 unchanged sentences
The remaining hotel portfolio that was in receivership was sold by the lender in September 2021.
−Removed: • Industrial —operations of the bulk industrial portfolio prior to the sale of the Company's 50 % interest and deconsolidation in December 2020.
Income (loss) from discontinued operations is presented below.
2 unchanged sentences
Property operating income $ 69,202 $ 737,282 $ 1,217,236
−Removed: Interest income 19,143 73,345 164,445
Fee income 9,797 58,197 94,399
+Added: Interest income 1,075 19,143 73,345
Other income 10,338 29,037 29,450
4 unchanged sentences
Depreciation and amortization 2,339 96,860 337,262
−Removed: Provision for loan losses — — 35,880
Impairment loss 35,985 317,405 2,556,051
4 unchanged sentences
Other gain (loss), net 14,490 72,617 ( 194,860 )
−Removed: Equity method earnings (losses) ( 233,725 ) ( 203,399 ) 129,709
−Removed: Income (loss) from discontinued operations before income taxes ( 550,188 ) ( 3,159,651 ) 423,641
−Removed: Income tax expense ( 49,900 ) ( 39,671 ) ( 23,068 )
−Removed: Income (loss) from discontinued operations ( 600,088 ) ( 3,199,322 ) 400,573
−Removed: Income (loss) from discontinued operations attributable to:
+Added: Equity method losses ( 8,170 ) ( 233,725 ) ( 203,399 )
+Added: Loss from discontinued operations before income taxes ( 151,452 ) ( 550,188 ) ( 3,159,651 )
+Added: Income tax benefit (expense) 2,748 ( 49,900 ) ( 39,671 )
+Added: Loss from discontinued operations ( 148,704 ) ( 600,088 ) ( 3,199,322 )
+Added: Loss from discontinued operations attributable to:
Noncontrolling interests in investment entities ( 29,145 ) ( 337,685 ) ( 712,771 )
2 unchanged sentences
$ ( 110,093 ) $ ( 237,458 ) $ ( 2,240,011 )
−Removed: Recurring Fair Values
−Removed: Financial assets and financial liabilities carried at fair value on a recurring basis include financial instruments for which the fair value option was elected, but exclude financial assets under the NAV practical expedient.
−Removed: Fair value is categorized into a three tier hierarchy that is prioritized based upon the level of transparency in inputs used in the valuation techniques.
−Removed: Marketable Equity Securities
−Removed: Marketable equity securities of $ 201.9 million at December 31, 2021 and $ 218.5 million at December 31, 2020 (Note 5) consist of publicly traded equity securities held largely by private open-end funds sponsored and consolidated by the Company, and prior to January 2021, equity investment in a third party mutual fund.
−Removed: The equity securities of the consolidated funds comprise listed stocks primarily in the U.S.
−Removed: and to a lesser extent, in Europe, and predominantly in the technology, media and telecommunications sectors.
−Removed: These marketable equity securities are valued based upon listed prices in active markets and classified as Level 1 of the fair value hierarchy.
−Removed: The Company's derivative instruments generally consist of:
−Removed: (i) foreign currency put options, forward contracts and costless collars to hedge the foreign currency exposure of certain foreign-denominated investments or investments in foreign subsidiaries (in GBP and EUR), with notional amounts and termination dates based upon the anticipated return of capital from these investments;
−Removed: and (ii) interest rate caps to limit the exposure to changes in interest rates on various floating rate debt obligations (indexed to LIBOR and GBP LIBOR and additionally, EURIBOR prior to December 31, 2021).
−Removed: These derivative contracts may be designated as qualifying hedge accounting relationships, specifically as net investment hedges and cash flow hedges, respectively.
−Removed: Fair values were $ 0.9 million at December 31, 2021 and $ 0.1 million at December 31, 2020 for derivative assets, included in other assets, and $ 103.8 million at December 31, 2020 for derivative liabilities, included in other liabilities.
−Removed: The Company did not have any derivatives in a liability position at December 31, 2021.
−Removed: All derivative positions were non-designated economic hedges except for an immaterial derivative asset at December 31, 2020.
−Removed: Derivative notional amounts at December 31, 2021 and 2020 aggregated to the equivalent of $ 182.3 million and $ 350.5 million, respectively, for foreign exchange contracts, and the equivalent of $ 2.0 billion and $ 4.6 billion, respectively, for interest rate contracts.
−Removed: The derivative instruments are subject to master netting arrangements with counterparties that allow the Company to offset the settlement of derivative assets and liabilities in the same currency by instrument type or, in the event of default by the counterparty, to offset all derivative assets and liabilities with the same counterparty.
−Removed: Notwithstanding the conditions for right of offset may have been met, the Company presents derivative assets and liabilities with the same counterparty on a gross basis on the consolidated balance sheets.
−Removed: Realized and unrealized gains and losses on derivative instruments are recorded in other gain (loss) on the consolidated statement of operations, other than interest expense, as follows:
+Added: Subsequent Events
+Added: Other than as disclosed elsewhere, no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the accompanying notes.
+Added: DigitalBridge Group, Inc.
+Added: Schedule III—Real Estate and Accumulated Depreciation
+Added: December 31, 2022
+Added: (Amounts in thousands) Initial Cost Costs Capitalized Gross Cost Basis (2) Accumulated Depreciation (3) Net Carrying Amount
+Added: (4) Date of Acquisition or Construction
+Added: Encumbrances Land Buildings and Improvements (1) Land Buildings and Improvements (1) Total
+Added: Data Centers—Colocation
+Added: Atlanta, GA ATL 2 & 3 $ 49,622 $ 1,467 $ 73,640 $ 40,153 $ 1,467 $ 113,793 $ 115,260 $ ( 12,970 ) $ 102,290 2020
+Added: Denver, CO DEN 1 29,136 2,405 41,695 10,754 2,405 52,449 54,854 ( 5,713 ) 49,141 2020
+Added: Westminster, CO DEN 4 9,433 992 13,286 642 992 13,928 14,920 ( 1,459 ) 13,461 2020
+Added: Denver, CO DEN 5 (5)
+Added: 9,775 1,690 13,106 12,524 1,690 25,630 27,320 — 27,320 2021
+Added: Dallas, TX DFW 4 31,666 1,896 46,034 2,294 1,896 48,328 50,224 ( 7,016 ) 43,208 2020
+Added: Washington, DC IAD 3 (5)
+Added: 8,336 12,618 — 166,584 12,618 166,584 179,202 — 179,202 2021
+Added: New York, NY LGA 3 (5)
+Added: 15,661 23,704 — 14,900 23,704 14,900 38,604 — 38,604 2021
+Added: Irvine, CA SNA 1 33,611 10,574 40,300 6,454 10,574 46,754 57,328 ( 6,007 ) 51,321 2020
+Added: Atlanta, GA ATL 1 80,528 — 75,594 17,451 — 93,045 93,045 ( 16,246 ) 76,799 2019
+Added: Atlanta, GA ATL 4 (5)
+Added: — 2,728 — 9,443 2,728 9,443 12,171 — 12,171 2021
+Added: Denver, CO DEN 2 — 4,458 52,295 1,951 4,458 54,246 58,704 ( 7,168 ) 51,536 2022
+Added: Plano, TX DFW 3 202,538 12,039 58,097 29,345 12,039 87,442 99,481 ( 12,646 ) 86,835 2019
+Added: Minneapolis, MN MSP 3 — 5,116 — 50,057 5,116 50,057 55,173 ( 1,798 ) 53,375 2020
+Added: Overland Park, KS KC 2 50,553 453 58,394 2,163 453 60,557 61,010 ( 12,798 ) 48,212 2019
+Added: Lenexa, KS KC 3 70,547 884 15,089 15,243 884 30,332 31,216 ( 970 ) 30,246 2019
+Added: North Fayette, PA PIT 2 51,872 1,555 36,682 22,170 1,555 58,852 60,407 ( 10,937 ) 49,470 2019
+Added: Bluffdale, UT SLC 2 87,912 3,729 95,689 5,322 3,729 101,011 104,740 ( 20,899 ) 83,841 2019
+Added: Bluffdale, UT SLC 3 96,128 2,699 106,464 5,843 2,699 112,307 115,006 ( 23,329 ) 91,677 2019
+Added: Bluffdale, UT SLC 4 49,300 1,491 52,862 3,647 1,491 56,509 58,000 ( 10,983 ) 47,017 2019
+Added: Bluffdale, UT SLC 5 78,938 3,104 32,485 51,937 3,104 84,422 87,526 ( 12,243 ) 75,283 2019
+Added: Bluffdale, UT SLC 6 — 4,064 — 133,355 4,064 133,355 137,419 ( 1,203 ) 136,216 2019
+Added: Houston, TX HOU 1 102,595 6,443 230,441 1,328 6,443 231,769 238,212 ( 15,669 ) 222,543 2022
+Added: Houston, TX HOU 2 74,934 4,970 165,931 866 4,970 166,797 171,767 ( 9,224 ) 162,543 2022
+Added: Houston, TX HOU 3 60,492 15,260 120,274 778 15,260 121,052 136,312 ( 5,096 ) 131,216 2022
+Added: Houston, TX HOU 4 4,583 9,942 — — 9,942 — 9,942 — 9,942 2022
+Added: Houston, TX HOU 5 19,895 5,898 39,189 307 5,898 39,496 45,394 ( 2,240 ) 43,154 2022
+Added: Waco, TX ACT 1 6,697 — 10,137 797 — 10,934 10,934 ( 1,798 ) 9,136 2020
+Added: Austin, TX AUS 1 2,298 — 3,478 471 — 3,949 3,949 ( 645 ) 3,304 2020
+Added: Boston, MA BOS 1 4,005 — 6,062 259 — 6,321 6,321 ( 1,061 ) 5,260 2020
+Added: Denver, CO DEN 3 12,081 — 18,286 894 — 19,180 19,180 ( 3,196 ) 15,984 2020
+Added: Dallas, TX DFW 5 7,091 — 10,733 1,316 — 12,049 12,049 ( 1,945 ) 10,104 2020
+Added: Dallas, TX DFW 6 4,333 — 6,559 252 — 6,811 6,811 ( 1,146 ) 5,665 2020
+Added: Dallas, TX DFW 7 6,697 — 10,137 803 — 10,940 10,940 ( 1,818 ) 9,122 2020
+Added: (Amounts in thousands) Initial Cost Costs Capitalized Gross Cost Basis (2) Accumulated Depreciation (3) Net Carrying Amount
+Added: (4) Date of Acquisition or Construction
+Added: Encumbrances Land Buildings and Improvements (1) Land Buildings and Improvements (1) Total
+Added: Newark, NJ EWR 1 14,314 — 21,665 1,463 — 23,128 23,128 ( 3,850 ) 19,278 2020
+Added: Piscataway, NJ EWR 2 15,561 — 23,553 1,875 — 25,428 25,428 ( 4,122 ) 21,306 2020
+Added: Ashburn, VA IAD 1 62,376 — 94,412 9,468 — 103,880 103,880 ( 16,986 ) 86,894 2020
+Added: McLean, VA IAD 2 7,249 — 10,972 2,019 — 12,991 12,991 ( 2,031 ) 10,960 2020
+Added: Las Vegas, NV LAS 1 16,349 — 24,746 18,533 — 43,279 43,279 ( 6,242 ) 37,037 2020
+Added: Las Angeles, CA LAX 1 13,132 — 19,876 1,164 — 21,040 21,040 ( 3,474 ) 17,566 2020
+Added: New York, NY LGA 1 9,520 — 14,410 5,804 — 20,214 20,214 ( 2,901 ) 17,313 2020
+Added: New York, NY LGA 2 10,571 — 16,000 1,109 — 17,109 17,109 ( 2,823 ) 14,286 2020
+Added: Memphis, TN MEM 1 2,889 — 4,373 1,394 — 5,767 5,767 ( 877 ) 4,890 2020
+Added: Miami, FL MIA 1 9,652 — 14,609 5,164 — 19,773 19,773 ( 2,890 ) 16,883 2020
+Added: Minneapolis, MN MSP 4 4,530 — 6,857 80 — 6,937 6,937 ( 1,183 ) 5,754 2020
+Added: Chicago, IL ORD 1 7,879 — 11,926 1,377 — 13,303 13,303 ( 2,176 ) 11,127 2020
+Added: Chicago, IL ORD 2 12,081 — 18,286 828 — 19,114 19,114 ( 3,232 ) 15,882 2020
+Added: Mount Prospect, IL ORD 3 12,410 — 18,783 2,457 — 21,240 21,240 ( 3,410 ) 17,830 2020
+Added: Chicago, IL ORD 4 59,754 — 90,443 5,074 — 95,517 95,517 ( 15,969 ) 79,548 2020
+Added: Philadelphia, PA PHL 1 3,808 — 5,764 410 — 6,174 6,174 ( 1,026 ) 5,148 2020
+Added: Phoenix, AZ PHX 1,2 & 3 6,369 — 9,640 306 — 9,946 9,946 ( 1,677 ) 8,269 2020
+Added: San Diego, CA SAN 1 9,915 — 15,007 18,622 — 33,629 33,629 ( 3,327 ) 30,302 2020
+Added: San Diego, CA SAN 2 361 — 547 261 — 808 808 ( 114 ) 694 2020
+Added: Seattle, WA SEA 1 3,940 — 5,963 500 — 6,463 6,463 ( 1,068 ) 5,395 2020
+Added: Tukwila, WA SEA 2 6,041 — 9,143 3,736 — 12,879 12,879 ( 1,792 ) 11,087 2020
+Added: Santa Clara, CA SFO 1 20,420 — 30,907 925 — 31,832 31,832 ( 5,386 ) 26,446 2020
+Added: Irvine, CA SNA 2 22,652 — 34,286 35,236 — 69,522 69,522 ( 6,169 ) 63,353 2020
+Added: Feltham, UK LHR 1 20,551 — 31,106 93 — 31,199 31,199 ( 5,369 ) 25,830 2020
+Added: Paris, France PAR 1 6,970 — 10,549 1,365 — 11,914 11,914 ( 1,725 ) 10,189 2021
+Added: Saint-Denis, France PAR 2 2,217 — 3,356 — — 3,356 3,356 ( 493 ) 2,863 2021
+Added: Vélizy-Villacoublay, France PAR 3 4,815 — 7,288 8,066 — 15,354 15,354 ( 1,567 ) 13,787 2021
+Added: Montpellier, France MPL 1 1,584 — 2,397 236 — 2,633 2,633 ( 380 ) 2,253 2021
+Added: Balma, France TLS 1 1,647 — 2,493 626 — 3,119 3,119 ( 448 ) 2,671 2021
+Added: Lenexa, KS KC 1 9,979 — 5,286 5,859 — 11,145 11,145 ( 1,628 ) 9,517 2019
+Added: Salt Lake City, UT SLC 1 16,705 — 9,144 9,297 — 18,441 18,441 ( 2,510 ) 15,931 2019
+Added: Baltimore, MD BWI 1 — — 16,002 970 — 16,972 16,972 ( 4,789 ) 12,183 2019
+Added: Cleveland, OH CLE 1 8,273 — 10,348 194 — 10,542 10,542 ( 2,652 ) 7,890 2019
+Added: Dallas, TX DFW 1 78,881 — 93,453 6,880 — 100,333 100,333 ( 25,105 ) 75,228 2019
+Added: Richardson, TX DFW 2 25,852 — 28,756 3,853 — 32,609 32,609 ( 7,954 ) 24,655 2019
+Added: (Amounts in thousands) Initial Cost Costs Capitalized Gross Cost Basis (2) Accumulated Depreciation (3) Net Carrying Amount
+Added: (4) Date of Acquisition or Construction
+Added: Encumbrances Land Buildings and Improvements (1) Land Buildings and Improvements (1) Total
+Added: Indianapolis, IN IND 1 & IND 2 58,715 — 19,747 13,219 — 32,966 32,966 ( 7,793 ) 25,173 2019
+Added: Edina, MN MSP 1 7,555 — 9,113 481 — 9,594 9,594 ( 2,389 ) 7,205 2019
+Added: Eagan, MN MSP 2 41,426 — 48,762 2,421 — 51,183 51,183 ( 11,675 ) 39,508 2019
+Added: Pittsburgh, PA PIT 1 31,988 — 37,128 2,951 — 40,079 40,079 ( 9,572 ) 30,507 2019
+Added: Data Centers—Hyperscale
+Added: Santa Clara, CA 11 346,568 30,327 445,334 5,736 30,327 451,070 481,397 ( 47,244 ) 434,153 2020
+Added: Santa Clara, CA 12 294,952 12,026 298,042 2,163 12,026 300,205 312,231 ( 36,821 ) 275,410 2020
+Added: Santa Clara, CA 13 98,317 10,276 115,031 2,302 10,275 117,334 127,609 ( 13,685 ) 113,924 2020
+Added: Santa Clara, CA 14 98,317 8,813 122,892 2,461 8,813 125,353 134,166 ( 14,756 ) 119,410 2020
+Added: Santa Clara, CA 15 270,372 15,459 409,419 16,136 15,459 425,555 441,014 ( 44,947 ) 396,067 2020
+Added: Santa Clara, CA 16 147,476 8,148 171,634 113 8,148 171,747 179,895 ( 21,169 ) 158,726 2020
+Added: Santa Clara, CA 21 322,542 11,394 326,807 4,283 11,394 331,090 342,484 ( 35,620 ) 306,864 2020
+Added: Santa Clara, CA 22 368,619 12,258 379,417 41 12,258 379,458 391,716 ( 20,049 ) 371,667 2021
+Added: Quincy, WA 11 94,021 1,742 151,754 3,302 1,742 155,056 156,798 ( 23,844 ) 132,954 2020
+Added: Quincy, WA 12 236,846 1,967 179,865 26,469 1,967 206,334 208,301 ( 21,355 ) 186,946 2020
+Added: Montreal, Canada 11 90,556 2,445 208,639 37,016 2,445 245,655 248,100 ( 18,748 ) 229,352 2020
+Added: Quebec City, Canada 21 125,470 900 136,277 6,755 900 143,032 143,932 ( 16,515 ) 127,417 2020
+Added: Quebec City, Canada 22 229,489 1,655 278,054 11,551 1,655 289,605 291,260 ( 30,688 ) 260,572 2020
+Added: Total real estate $ 4,633,733 $ 257,589 $ 5,493,200 $ 902,947 $ 257,588 $ 6,396,148 $ 6,653,736 $ ( 732,438 ) $ 5,921,298
+Added: (1) Includes construction in progress and data center infrastructure.
+Added: (2) Presented net of impairment of real estate, where applicable.
+Added: (3) Depreciation is calculated using useful life ranging from 5 to 40 years for site improvements, 5 to 50 years for buildings, 5 to 40 years for building improvements, and 5 to 30 years for data center infrastructure.
+Added: (4) The aggregate gross cost of real estate for federal income tax purposes was approximately $ 3.8 billion at December 31, 2022.
+Added: (5) Represents construction or data center build-out that are in progress.
+Added: The following tables summarize the activity in real estate and accumulated depreciation:
Year Ended December 31,
(In thousands) 2022 2021 2020
−Removed: Foreign currency contracts:
−Removed: Designated contracts
−Removed: Realized gain transferred from AOCI to earnings $ 58,727 $ 414 $ 1,790
−Removed: Unrealized gain (loss) transferred from AOCI to earnings (1)
+Added: Real Estate, at Gross Cost Basis
+Added: Balance at January 1 $ 8,777,385 $ 14,028,516 $ 12,702,355
+Added: Asset acquisitions and business combinations 1,130,735 572,738 3,650,180
+Added: Measurement period adjustments for real estate acquired in business combinations — — ( 8,405 )
+Added: Foreclosures and exchanges of loans receivable for real estate — — 124,335
+Added: Improvements and capitalized costs (1)
523,049 325,281 180,787
−Removed: Non-designated contracts
−Removed: Unrealized gain (loss) in earnings 889 ( 2,727 ) —
−Removed: Interest rate contracts:
−Removed: Designated contracts
−Removed: Interest expense (2)
−Removed: Realized gain (loss) transferred from AOCI to earnings ( 1,328 ) — 8,019
−Removed: Non-designated contracts
−Removed: Realized and unrealized loss in earnings (3)
+Added: Dispositions (2)
( 3,720,789 ) ( 5,744,919 ) ( 869,776 )
−Removed: (1) The portion of derivative notional that is in excess of the beginning balance of the foreign denominated net investment is dedesignated upon a reassessment of the effectiveness of net investment hedges at period end.
−Removed: (2) Represents amortization of the cost of designated interest rate caps to interest expense based upon expected hedged interest payments on variable
−Removed: (3) Includes unrealized loss of $ 239.3 million in 2019 on a $ 2.0 billion notional forward starting swap that was settled at the end of 2019.
−Removed: Additionally, prior to January 2021, the Company had entered into a series of forward contracts on its shares in a third party real estate mutual fund in an aggregate notional amount of $ 119.0 million and a series of swap contracts with the same counterparty to pay the return of the Dow Jones U.S.
−Removed: Select REIT Total Return Index.
−Removed: The forward and swap contracts were settled upon expiration in January 2021 through delivery of all of the Company's shares in the mutual fund, realizing an immaterial net loss upon settlement.
−Removed: The forwards and swaps were not designated accounting hedges.
−Removed: At December 31, 2020, the forwards and swaps were in a liability position of $ 102.7 million and $ 0.1 million, respectively.
−Removed: During the year ended December 31, 2020, the forwards and swaps had realized and unrealized fair value gains totaling $ 15.4 million which were partially offset by a decrease in NAV of $ 14.3 million in the Company's investment in the mutual fund, both of which were recorded in other income on the consolidated statement of operations.
−Removed: The Company's foreign currency and interest rate contracts are generally traded over-the-counter, and are valued using a third-party service provider.
−Removed: Quotations on over-the-counter derivatives are not adjusted and are generally valued using observable inputs such as contractual cash flows, yield curve, foreign currency rates and credit spreads, and are classified as Level 2 of the fair value hierarchy.
−Removed: Although credit valuation adjustments, such as the risk of default, rely on
−Removed: Level 3 inputs, these inputs are not significant to the overall valuation of the derivatives.
−Removed: As a result, derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy.
−Removed: Settlement Liability
−Removed: In March 2020, the Company entered into a cooperation agreement with Blackwells Capital LLC ("Blackwells"), a stockholder of the Company.
−Removed: Pursuant to the cooperation agreement, Blackwells agreed to a standstill in its proxy contest with the Company, and to abide by certain voting commitments, including a standstill with respect to the Company until the expiration of the agreement in March 2030 and voting in favor of the Board of Directors' recommendations until the third anniversary of the agreement.
−Removed: Contemporaneously, the Company and Blackwells entered into a joint venture arrangement for the purpose of acquiring, holding and disposing of the Company's class A common stock.
−Removed: Pursuant to the arrangement, the Company contributed its class A common stock, valued at $ 14.7 million by the venture, and Blackwells contributed $ 1.47 million of cash that was then distributed to the Company, resulting in a net capital contribution of $ 13.23 million by the Company in the venture.
−Removed: All of the class A common stock held in the venture was repurchased by the Company in March 2020 (Note 9).
−Removed: Distributions from the joint venture arrangement upon dissolution effectively represent a settlement of the proxy contest with Blackwells.
−Removed: The initial fair value of the arrangement was recorded as a settlement loss on the statement of operations in March 2020, with a corresponding liability on the balance sheet, subject to remeasurement at each period end.
−Removed: The settlement liability represents the fair value of the disproportionate allocation of profits distribution to Blackwells pursuant to the joint venture arrangement.
−Removed: The profits are derived from dividend payments and appreciation in value of the Company's class A common stock, allocated between the Company and Blackwells based upon specified return hurdles.
−Removed: In June 2021, Blackwells terminated the arrangement and the joint venture was dissolved.
−Removed: The profits distribution allocated to Blackwells was valued at $ 47.0 million and paid in the form of 5.95 million shares of the Company's class A common stock, with $ 22.8 million recognized in 2021 through termination as other loss on the consolidated statement of operations.
−Removed: Prior to dissolution of the arrangement, the settlement liability, classified as a Level 3 fair value, was measured using a Monte Carlo simulation under a risk-neutral premise, assuming that the final distribution would occur at the end of the third year in March 2023.
−Removed: At December 31, 2020, the settlement liability was valued at $ 24.3 million, applying the following assumptions:
−Removed: (a) expected volatility of the Company's class A common stock of 67.2 % based upon a combination of historical and implied volatility of the Company's class A common stock;
−Removed: (b) zero expected dividend yield given the Company's suspension of its common stock dividend beginning the second quarter of 2020;
−Removed: and (c) risk free rate of 0.14 % per annum based upon a compounded zero-coupon U.S.
−Removed: Treasury yield.
−Removed: During 2020, the settlement liability increased approximately $ 20.4 million from inception in March 2020, recorded as other loss on the consolidated statement of operations.
−Removed: Fair Value Option
−Removed: The following discussion excludes loans receivable and equity method investments held for disposition which are addressed in Note 11.
−Removed: Loans Receivable
−Removed: Loans receivable held for investment are carried at fair value under the fair value option, consisting of corporate loans to borrowers in the digital infrastructure and telecommunications sector, and are predominantly warehoused for a future digital credit investment vehicle and a securitization vehicle.
−Removed: At December 31, 2021, fair value of loans held for investment totaled $ 173.9 million, with $ 91.0 million classified as Level 2 and $ 82.9 million classified as Level 3.
−Removed: At December 31, 2020, fair value of loans held for investment totaling $ 36.8 million were all classified as Level 3.
−Removed: Fair value of Level 2 loans held for investment were obtained from a reputable pricing service and were based upon quotations from dealers who act as market makers for these loans.
−Removed: Fair value of Level 3 loans held for investment were determined based upon discounted cash flow projections of principal and interest expected to be collected, which include, but are not limited to, consideration of the financial standing and operating results of the borrower, and applying discount rates ranging between 8.9 % to 10.0 % at December 31, 2021 and 7.2 % to 8.9 % at December 31, 2020.
−Removed: There were no loans that were 90 days or more past due as to principal or interest and/or placed on nonaccrual at December 31, 2021 and 2020.
−Removed: Equity Method Investments
−Removed: At December 31, 2021, there were no equity method investments under the fair value option other than investments held for disposition (Note 11).
−Removed: At December 31, 2020, the Company had one equity method investment of $ 28.5 million under the fair value option.
−Removed: Beginning May 2021, the Company's equity interest in the investee is accounted for as a marketable equity security following the merger of the investee into a special purpose acquisition company.
−Removed: The following table presents changes in recurring Level 3 fair value assets held for investment.
−Removed: Realized and unrealized gains (losses) are included in other gain (loss) for loans receivable and equity method earnings (losses) for equity method investments.
−Removed: Fair Value Option
−Removed: (In thousands) Loans Held for Investment Equity Method Investments
−Removed: Fair value at December 31, 2019 $ — $ 25,000
−Removed: Purchases, originations, drawdowns and contributions 36,395 —
−Removed: Change in accrued interest and capitalization of paid-in-kind interest 403 —
−Removed: Realized and unrealized gain in earnings, net — 3,540
−Removed: Fair value at December 31, 2020 $ 36,798 $ 28,540
−Removed: Net unrealized losses in earnings on instruments held at December 31, 2020 $ — $ 3,540
−Removed: Fair value at December 31, 2020 $ 36,798 $ 28,540
−Removed: Purchases, originations, drawdowns and contributions 61,026 —
+Added: Impairment (Note 21)
+Added: ( 34,990 ) ( 316,135 ) ( 1,878,012 )
+Added: Effect of changes in foreign exchange rates ( 21,654 ) ( 88,096 ) 127,052
+Added: Balance at December 31 6,653,736 8,777,385 14,028,516
+Added: Classified as held for disposition, net (3)
+Added: — ( 3,413,018 ) ( 9,458,467 )
+Added: Balance at December 31, held for investment $ 6,653,736 $ 5,364,367 $ 4,570,049
+Added: Year Ended December 31,
+Added: (In thousands) 2022 2021 2020
+Added: Accumulated Depreciation
+Added: Balance at January 1 $ 725,685 $ 1,397,627 $ 1,042,422
+Added: Depreciation 350,732 345,769 420,209
+Added: Dispositions (2)
+Added: ( 339,460 ) ( 1,010,599 ) ( 74,692 )
+Added: Effect of changes in foreign exchange rates ( 4,519 ) ( 7,112 ) 9,688
+Added: Balance at December 31 732,438 725,685 1,397,627
+Added: Classified as held for disposition, net (3)
+Added: — ( 333,602 ) ( 1,279,443 )
+Added: Balance at December 31, held for investment $ 732,438 $ 392,083 $ 118,184
+Added: (1) Includes transaction costs capitalized for asset acquisitions.
+Added: (2) Includes amounts classified as held for disposition during the year and disposed before the end of the year.
+Added: (3) Amounts classified as held for disposition during the year and remain as held for disposition at the end of the year.
+Added: Includes amounts retrospectively classified as held for disposition in connection with discontinued operations.
+Added: Form 10-K Summary
+Added: EXHIBIT INDEX
+Added: Exhibit Number Description
+Added: 3.1* Restated Charter of DigitalBridge Group, Inc.
+Added: (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on November 7, 2022)
+Added: 3.2 Amended and Restated Bylaws of DigitalBridge Group, Inc.
+Added: (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on June 23, 2021)
+Added: 3.3 Articles Supplementary designating 7.15% Series I Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-A filed on June 5, 2017)
+Added: 3.4 Articles Supplementary designating 7.125% Series J Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share (incorporated by reference to Exhibit 3.3 to Colony NorthStar, Inc.’s Registration Statement on Form 8-A filed on September 22, 2017)
+Added: 4.1 Form of stock certificate evidencing the 7.125% Series J Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed on September 22, 2017)
+Added: 4.2 Form of stock certificate evidencing the 7.15% Series I Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed on June 5, 2017)
+Added: 4.3 Indenture, dated as of April 10, 2013, between DigitalBridge Group, Inc.
+Added: (f/k/a Colony Financial, Inc.) and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.1 to Colony Financial, Inc.’s Current Report on Form 8-K filed on April 10, 2013)
+Added: 4.4 First Supplemental Indenture, dated as of April 10, 2013, by and between DigitalBridge Group, Inc.
+Added: (f/k/a Colony Financial, Inc.) and The Bank of New York Mellon (incorporated by reference to Exhibit 4.2 to Colony Capital, Inc.’s Current Report on Form 8-K filed on April 10, 2013)
+Added: 4.5 Third Supplemental Indenture, dated as of January 10, 2017, between DigitalBridge Group, Inc.
+Added: (f/k/a Colony NorthStar, Inc.) and The Bank of New York Mellon (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 10, 2017)
+Added: 4.6* Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
+Added: 4.7 Form of Class A Common Stock Purchase Warrant of DigitalBridge Group, Inc.
+Added: (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 24, 2022)
+Added: 4.8 Indenture, dated as of July 21, 2020, among DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC), DigitalBridge Group, Inc.
+Added: (f/k/a Colony Capital, Inc.) and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on July 23, 2020)
+Added: 4.9 Form of 5.75% Exchangeable Senior Notes due 2025 (included in Exhibit 4.8)
+Added: 4.10 Registration Rights Agreement, dated as of July 21, 2020, by and among DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC), DigitalBridge Group, Inc.
+Added: (f/k/a Colony Capital, Inc.) and the initial purchasers party thereto (incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on July 23, 2020)
+Added: 4.11 Base Indenture, dated as of July 9, 2021, by and among DigitalBridge Issuer, LLC, DigitalBridge Co-Issuer, LLC, together as Co-Issuers, certain indirect and direct subsidiaries of the Co-Issuers and Citibank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on July 15, 2021)
+Added: 4.12 First Amendment to Base Indenture, dated as of April 1, 2022, by and among DigitalBridge Issuer, LLC, DigitalBridge Co-Issuer, LLC, together as Co-Issuers, certain indirect and direct subsidiaries of the Co-Issuers and Citibank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on April 5, 2022)
+Added: 4.13 Series 2021-1 Supplement to Base Indenture, dated as of July 9, 2021, by and between DigitalBridge Issuer, LLC and DigitalBridge Co-Issuer, LLC, together as Co-Issuers of the Series 2021-1 secured fund fee revenue notes, Class A-2, and Series 2021-1 variable funding senior notes, Class A-1, certain indirect and direct subsidiaries of the Co-Issuers and Citibank, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on July 15, 2021)
+Added: 4.14 Amendment No.
+Added: 1 to Series 2021-1 Supplement to Base Indenture, dated as of April 1, 2022, by and among DigitalBridge Issuer, LLC and DigitalBridge Co-Issuer, LLC, together as Co-Issuers, certain indirect and direct subsidiaries of the Co-Issuers and Citibank, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on April 5, 2022)
+Added: Certain Instruments defining the rights of holders of long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K.
+Added: The Registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.
+Added: 10.1 Third Amended and Restated Limited Liability Company Agreement of DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 10, 2017)
+Added: 10.2 Amendment No.
+Added: 1 to the Third Amended and Restated Limited Liability Company Agreement of DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC), dated as of June 23, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017)
+Added: 10.3 Amendment No.
+Added: 2 to the Third Amended and Restated Limited Liability Company Agreement of DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC), dated as of October 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2017)
+Added: Exhibit Number Description
+Added: 10.4 Amendment No.
+Added: 3 to the Third Amended and Restated Limited Liability Company Agreement of DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC), dated as of October 18, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2017)
+Added: 10.5 Amendment No.
+Added: 4 to the Third Amended and Restated Limited Liability Company Agreement of DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC), dated as of November 5, 2018 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on November 9, 2018)
+Added: 10.6 Amendment No.
+Added: 5 to the Third Amended and Restated Limited Liability Company Agreement of DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC), dated as of July 1, 2021 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, filed on August 9, 2021)
+Added: 10.7† DigitalBridge Group, Inc.
+Added: 2014 Omnibus Stock Incentive Plan, as amended and restated on August 22, 2022 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 22, 2022)
+Added: 10.8 Form of Indemnification Agreement, by and between DigitalBridge Group, Inc.
+Added: (f/k/a Colony NorthStar, Inc.) and the Officers and Directors of DigitalBridge Group, Inc.
+Added: (incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
+Added: 10.9† Amended and Restated Employment Agreement, dated as of December 9, 2022, between DigitalBridge Group, Inc.
+Added: and Ronald M.
+Added: Sanders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 22, 2022)
+Added: 10.10† Employment Agreement, dated as of July 25, 2019, between DigitalBridge Group, Inc.
+Added: (f/k/a Colony Capital, Inc.) and Marc Ganzi (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 30, 2019)
+Added: 10.11† Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2022)
+Added: 10.12† Form of Performance Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2022)
+Added: 10.13 Investment Agreement, dated as of July 7, 2020, by and among Colony Valhalla Partners I-A Holdings, L.P., a Delaware limited partnership, Colony Valhalla Partners I-B Holdings, L.P., a Delaware limited partnership, Colony Valhalla Partners II Holdings, L.P., a Delaware limited partnership, CBRE Caledon Valhalla Aggregator Holdings LP, a Delaware limited partnership and Vantage Data Centers Holdings, LLC, a Delaware limited liability company (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 13, 2020)
+Added: 10.14 Agreement of Purchase and Sale, dated as of April 14, 2022, by and among DigitalBridge Digital IM Holdco, LLC, Wafra Strategic Holdings LP, W-Catalina (B) LLC, W-Catalina (S) LLC, W-Catalina (C) LLC, and, solely with respect to certain sections, DigitalBridge Group, Inc.
+Added: and DigitalBridge Operating Company, LLC (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on April 18, 2022)
+Added: 10.15 Termination Agreement, dated as of May 23, 2022, by and among DigitalBridge Management Holdings, LLC, DigitalBridge Digital IM Holdco, LLC, DigitalBridge IM Manager, LLC, DigitalBridge Operating Company, LLC, DigitalBridge Group, Inc., Colony DCP (CI) Bermuda, LP, Marc Ganzi, Ben Jenkins, W-Catalina (C) LLC and W-Catalina (S) LLC (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on May 24, 2022)
+Added: 10.16 Registration Rights Agreement, dated as of May 23, 2022, by and between DigitalBridge Group, Inc.
+Added: and Wafra Strategic Holdings LP (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on May 24, 2022)
+Added: 10.17 Amended and Restated Carried Interest Participation Agreement, dated as of May 23, 2022, by and among Colony DCP (CI) Bermuda, LP, Colony DCP (CI) GP, LLC, DigitalBridge Operating Company, LLC, DigitalBridge Group, Inc.
+Added: and W-Catalina (C) LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 24, 2022)
+Added: 10.18† Amended and Restated Restrictive Covenant Agreement, dated as of July 17, 2020, by and between DigitalBridge Group, Inc.
+Added: (f/k/a Colony Capital, Inc.) and Marc Ganzi (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on July 23, 2020)
+Added: 10.19 Joinder and Amendment to Letter Agreement, dated as of July 22, 2020, by and among Digital Bridge Holdings, LLC, CC Valhalla Investor, LLC, Marc Ganzi, Benjamin Jenkins and the other parties named therein (incorporated by reference to Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020)
+Added: 10.20 Assignment and Contribution Agreement, dated as of July 22, 2020, by and among Marc Ganzi, Benjamin Jenkins, MCG Analog, LLC, the Ganzi Extended Family Trust, BJJ Analog, LLC, DB Aviator Manager Rollover Holdings, L.P., DCR YieldCo Holdings, LP and DCR and Aviator Holdings GP, LLC (incorporated by reference to Exhibit 10.12 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020)
+Added: 10.21 Amended and Restated Partnership Agreement of DB Aviator Manager Rollover Holdings, L.P., dated as of July 22, 2020, by and among Colony Valhalla GP, LLC, Colony Capital Acquisitions, LLC, MCG Analog, LLC, Ganzi Extended Family Trust, BJJ Analog, LLC and Valhalla Management Holdings, LLC (incorporated by reference to Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020)
+Added: 10.22† Second Amended and Restated Employment Agreement, dated as of September 27, 2022, between DigitalBridge Group, Inc.
+Added: and Jacky Wu (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 3, 2022)
+Added: 10.23† Employment Agreement, dated as of May 5, 2021 between DigitalBridge Group, Inc.
+Added: (f/k/a Colony Capital, Inc.) and Sonia Kim (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021)
+Added: 10.24† Amended and Restated Employment Agreement, dated as of March 28, 2022, between DigitalBridge Group, Inc.
+Added: and Benjamin J.
+Added: Jenkins (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2022)
+Added: 10.25† Amended and Restated Employment Agreement, dated as of March 28, 2022, between DigitalBridge Group, Inc.
+Added: and Liam Stewart (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2022)
+Added: 10.26 Registration Rights Agreement, dated as of January 31, 2018, by and among BrightSpire Capital, Inc.
+Added: (f/k/a Colony NorthStar Credit Real Estate), Inc., DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC) and NRF RED REIT Corp.
+Added: (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 1, 2018)
+Added: 10.27 Amended and Restated Stockholders Agreement, dated as of April 30, 2021, by and between BrightSpire Capital, Inc.
+Added: (f/k/a Colony Credit Real Estate, Inc.) and DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 4, 2021)
+Added: Exhibit Number Description
+Added: 10.28 Class A-1 Note Purchase Agreement, dated as of July 9, 2021, by and among DigitalBridge Issuer, LLC and DigitalBridge Co-Issuer, LLC, together as Co-Issuers, each of DigitalBridge Holdings 1, LLC, DigitalBridge Holdings 2, LLC and DigitalBridge Holdings 3, LLC, DigitalBridge Guarantor, LLC and DigitalBridge Co-Guarantor, LLC, as Co-Guarantors, Colony Capital Investment Holdco, LLC, as Manager, the conduit investors party thereto, the financial institutions party thereto, certain funding agents, and Barclays Bank PLC, as L/C Provider and Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 15, 2021)
+Added: 10.29 Amendment No.
+Added: 1 Class A-1 Note Purchase Agreement, dated as of April 1, 2022, by and among DigitalBridge Issuer, LLC and DigitalBridge Co-Issuer, LLC, together as Co-Issuers, each of DigitalBridge Holdings 1, LLC, DigitalBridge Holdings 2, LLC and DigitalBridge Holdings 3, LLC, together as Asset Entities, DigitalBridge Guarantor, LLC and DigitalBridge Co-Guarantor, LLC, together as Co-Guarantors, DigitalBridge Investment Holdco, LLC, as Manager, the conduit investors party thereto, the financial institutions party thereto, certain funding agents, and Barclays Bank PLC, as L/C Provider and Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 5, 2022)
+Added: 10.30 The Guarantee and Security Agreement, dated as of July 9, 2021, between DigitalBridge Guarantor, LLC and Citibank, N.A., as Trustee (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on July 15, 2021)
+Added: 10.31 The Guarantee and Security Agreement, dated as of July 9, 2021, between DigitalBridge Co-Guarantor, LLC and Citibank, N.A., as Trustee (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on July 15, 2021)
+Added: 10.32 Management Agreement, dated as of July 9, 2021, by and among DigitalBridge Issuer, LLC and DigitalBridge Co-Issuer, LLC, together as Co-Issuers, each of DigitalBridge Holdings 1, LLC, DigitalBridge Holdings 2, LLC and DigitalBridge Holdings 3, LLC, DigitalBridge Guarantor, LLC and DigitalBridge Co-Guarantor, LLC, as Co-Guarantors, and Colony Capital Investment Holdco, LLC, as Manager (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on July 15, 2021)
+Added: 10.33 Purchase and Sale Agreement, dated September 6, 2021, between DigitalBridge Operating Company, LLC and CWP Bidco LP (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on September 10, 2021)
+Added: 10.34 Amendment to the Purchase and Sale Agreement, dated February 28, 2022, between DigitalBridge Operating Company, LLC and CWP Bidco LP (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 3, 2022)
+Added: 10.35 Agreement for Sale and Purchase, dated March 25, 2022, between Telenet Group Holding NV and DB SAF Pillar Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 31, 2022)
+Added: 10.36 Amended and Restated Equity Purchase Agreement, by and among AMP Group Holdings Limited, AMP Capital Investors International Holdings Limited, DigitalBridge Operating Company, LLC and DigitalBridge Investment Holdco, LLC, dated as of December 19, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 22, 2022)
+Added: 21.1* List of Subsidiaries of DigitalBridge Group, Inc.
+Added: 23.1* Consent of Ernst & Young LLP
+Added: 31.1* Certification of Marc C.
+Added: Ganzi, Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
+Added: 31.2* Certification of Jacky Wu, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
+Added: 32.1* Certification of Marc C.
+Added: Ganzi, Chief Executive Officer, pursuant to 18 U.S.C.
+Added: Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
+Added: 32.2* Certification of Jacky Wu, Chief Financial Officer, pursuant to 18 U.S.C.
+Added: Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
+Added: 101.INS** XBRL Instance Document
+Added: 101.SCH Inline XBRL Taxonomy Extension Schema
+Added: 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase
+Added: 101.LAB Inline XBRL Taxonomy Extension Label Linkbase
+Added: 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase
+Added: 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase
+Added: 104** Cover Page Interactive Data File
+Added: † Denotes a management contract or compensatory plan contract or arrangement.
+Added: * Filed herewith.
+Added: ** The document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
+Added: *** Schedules and exhibits to such agreement have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K.
+Added: The Registrant will furnish copies of such schedules and exhibits to the SEC upon request.
+Added: Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
+Added: February 27, 2023
+Added: DigitalBridge Group, Inc.
+Added: Chief Executive Officer
+Added: (Principal Executive Officer)
+Added: POWER OF ATTORNEY
+Added: KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jacky Wu and Ronald M.
+Added: Sanders and each of them severally, her or his true and lawful attorney-in-fact with power of substitution and re-substitution to sign in her or his name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S.
+Added: Securities and Exchange Commission in connection with this Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and purposes as she or he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and her or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
+Added: Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below on behalf of the Registrant in the capacities and on the dates indicated.
+Added: Signature Title Date
+Added: Ganzi Chief Executive Officer (Principal Executive Officer) February 27, 2023
+Added: /s/ Jacky Wu Chief Financial Officer (Principal Financial Officer) February 27, 2023
+Added: /s/ Sonia Kim Chief Accounting Officer (Principal Accounting Officer) February 27, 2023
+Added: Curtin Director February 27, 2023
+Added: Braxton Carter Director February 27, 2023
+Added: Braxton Carter
+Added: /s/ Jeannie H.
+Added: Diefenderfer Director February 27, 2023
+Added: Fosheim Director February 27, 2023
+Added: /s/ Gregory J.
+Added: McCray Director February 27, 2023
+Added: /s/ Sháka Rasheed Director February 27, 2023
+Added: Sháka Rasheed
+Added: /s/ Dale Anne Reiss Director February 27, 2023
+Added: Dale Anne Reiss
+Added: Tolley Director February 27, 2023
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.